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Effects of Restrictions on International Permit Trading: The MS-MRT Model


  • Paul M. Bernstein
  • W. David Montgomery
  • Thomas F. Rutherford
  • Gui-Fang Yang


This paper assesses the economic impacts of carbon abatement programs proposed under the Kyoto protocol: the distribution of economic burden across countries and regions, the implications for international competitiveness, and the consequences of international permit trading. Our analysis is based on a dynamic global trade model which accounts for systematic differences in the energy efficiency of production in industrial and developing countries. Emission limits adversely affect the welfare of industrial and some developing countries, including all of the oil-exporting countries. Imports from Annex-B countries become more costly while demand for most developing country exports is reduced. Oil prices simultaneously fall, so the net impact on oil-importing developing countries is ambiguous. Energy-intensive industries have a strong economic incentive to relocate production to low-energy cost developing countries. Global trading in emission rights provides the lowest cost path to Kyoto, but it is unclear whether there are incentives for all non-Annex B countries to participate.

Suggested Citation

  • Paul M. Bernstein & W. David Montgomery & Thomas F. Rutherford & Gui-Fang Yang, 1999. "Effects of Restrictions on International Permit Trading: The MS-MRT Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 221-256.
  • Handle: RePEc:aen:journl:1999si-a10

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    References listed on IDEAS

    1. Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 920-937, July.
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    Cited by:

    1. Forsström, Juha & Honkatukia, Juha & Sulamaa, Pekka, 2003. "Global Change and Energy Markets - Analysis the Effects of Nordic Electricity Market Integration on Environmental Policy Using GTAP-E Model," Discussion Papers 882, The Research Institute of the Finnish Economy.
    2. Simon Quemin & Christian de Perthuis, 2017. "Transitional restricted linkage between Emissions Trading Schemes," Working Papers 1701, Chaire Economie du climat.
    3. Claudia Kemfert & Wietze Lise & Richard Tol, 2004. "Games of Climate Change with International Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 28(2), pages 209-232, June.
    4. Holtsmark, Bjart & Maestad, Ottar, 2002. "Emission trading under the Kyoto Protocol--effects on fossil fuel markets under alternative regimes," Energy Policy, Elsevier, vol. 30(3), pages 207-218, February.
    5. Claudia Kemfert & Hans Kremers, 2004. "A Computable General Equilibrium Assessment of a Developing Country Joining an Annex B Emission Permit Market," Discussion Papers of DIW Berlin 454, DIW Berlin, German Institute for Economic Research.
    6. Gernot Klepper & Sonja Peterson, 2005. "Trading Hot-Air. The Influence of Permit Allocation Rules, Market Power and the US Withdrawal from the Kyoto Protocol," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(2), pages 205-228, October.
    7. Springer, Urs, 2003. "The market for tradable GHG permits under the Kyoto Protocol: a survey of model studies," Energy Economics, Elsevier, vol. 25(5), pages 527-551, September.
    8. Balistreri, Edward J., 2002. "Operationalizing equilibrium unemployment: A general equilibrium external economies approach," Journal of Economic Dynamics and Control, Elsevier, vol. 26(3), pages 347-374, March.
    9. Carolyn Fischer & Richard D. Morgenstern, 2006. "Carbon Abatement Costs: Why the Wide Range of Estimates?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 73-86.
    10. Khalil Helioui, 2006. "Coordination internationale des politiques climatiques : quelle efficacité ?," CIRED Working Papers hal-00866433, HAL.
    11. Persson, Tobias A. & Azar, C. & Johansson, D. & Lindgren, K., 2007. "Major oil exporters may profit rather than lose, in a carbon-constrained world," Energy Policy, Elsevier, vol. 35(12), pages 6346-6353, December.
    12. Shreekant Gupta, 2010. "Incentive Based Approaches for Mitigating Greenhouse Gas Emmissions : Issues And Prospects for India," Working Papers id:2638, eSocialSciences.
    13. Böhringer, Christoph, 2001. "Climate politics from Kyoto to Bonn: from little to nothing?!?," ZEW Discussion Papers 01-49, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    14. Claudia Kemfert, Truong P. Truong, and Thomas Bruckner, 2006. "Economic Impact Assessment of Climate Change - A Multi-gas Investigation with WIAGEM-GTAPEL-ICM," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 441-460.
    15. Justin Caron, Sebastian Rausch, and Niven Winchester, 2015. "Leakage from sub-national climate policy: The case of Californias capandtrade program," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    16. Andreas Löschel & Zhong Zhang, 2002. "The economic and environmental implications of the US repudiation of the kyoto protocol and the subsequent deals in Bonn and Marrakech," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(4), pages 711-746, December.
    17. Barnett, Jon & Dessai, Suraje & Webber, Michael, 2004. "Will OPEC lose from the Kyoto Protocol?," Energy Policy, Elsevier, vol. 32(18), pages 2077-2088, December.
    18. Farhana Yamin & Jean-Marc Burniaux & Andries Nentjes, 2001. "Kyoto Mechanisms: Key Issues for Policy-makers for COP-6," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 1(2), pages 187-218, April.
    19. ME. Canes, 2000. "Country impacts of multilateral oil sanctions," Contemporary Economic Policy, Western Economic Association International, vol. 18(2), pages 135-144, April.
    20. Andrew Muller, R. & Mestelman, Stuart & Spraggon, John & Godby, Rob, 2002. "Can Double Auctions Control Monopoly and Monopsony Power in Emissions Trading Markets?," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 70-92, July.
    21. Dong, Yan & Whalley, John, 2012. "Joint non-OPEC carbon taxes and the transfer of OPEC monopoly rents," Journal of Policy Modeling, Elsevier, vol. 34(1), pages 49-63.
    22. Kaneko, Shinji & Yonamine, Asaka & Jung, Tae Yong, 2006. "Technology choice and CDM projects in China: case study of a small steel company in Shandong Province," Energy Policy, Elsevier, vol. 34(10), pages 1139-1151, July.
    23. Shreekant Gupta, 2000. "Incentive-Based Approaches for Mitigating Greenhouse Gas Emissions: Issues and Prospects for India," Working papers 85, Centre for Development Economics, Delhi School of Economics.

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    JEL classification:

    • F0 - International Economics - - General


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