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CO2 Emissions Control Agreements: Incentives for Regional Participation

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  • Stephen C. Peck
  • Thomas J. Teisberg

Abstract

This paper explores the incentives for participation in international CO2 control agreements using tradable emission permits. We employ a welfare analysis in a two-region model to explore these incentives. The two regions are Annex-I (A-I) and Non-Annex I (Non-A-I). A key insight underlying the analysis is that emission permit allocations must not depart too far from optimal emissions paths, to avoid creating future incentives to drop out of the agreement. We find a range of permit allocations that improves the welfare of both the Annex-I and the Non-Annex I, and compare them with allocations based on regional population or GDP. In addition, we examine the implications of the Kyoto agreement in the context of this welfare analysis. We find that the Kyoto agreement transfers wealth from A-I to the Non-A-I, while failing to realize tile efficiency gains to be hoped for from an agreement to control CO2 emissions.

Suggested Citation

  • Stephen C. Peck & Thomas J. Teisberg, 1999. "CO2 Emissions Control Agreements: Incentives for Regional Participation," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 367-390.
    • Handle: RePEc:aen:journl:1999si-a14
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    Cited by:

    1. Pizer, William A. & Kopp, Raymond, 2005. "Calculating the Costs of Environmental Regulation," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 25, pages 1307-1351, Elsevier.
    2. He, Shawei & Marc Kilgour, D. & Hipel, Keith W., 2017. "A general hierarchical graph model for conflict resolution with application to greenhouse gas emission disputes between USA and China," European Journal of Operational Research, Elsevier, vol. 257(3), pages 919-932.
    3. Ingmar Schumacher, 2018. "The Aggregation Dilemma In Climate Change Policy Evaluation," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 1-20, August.
    4. Elizabeth Stanton, 2011. "Negishi welfare weights in integrated assessment models: the mathematics of global inequality," Climatic Change, Springer, vol. 107(3), pages 417-432, August.
    5. Ingmar Schumacher, 2014. "The Aggregation Dilemma," Working Papers 2014-224, Department of Research, Ipag Business School.
    6. Courtois, Pierre & Tazdaït, Tarik, 2007. "Games of influence in climate change negotiations: Modelling interactions," Ecological Modelling, Elsevier, vol. 204(3), pages 301-314.
    7. Kopp, Raymond, 2004. "Near-Term Greenhouse Gas Emissions Targets," RFF Working Paper Series dp-04-41, Resources for the Future.
    8. 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.
    9. Dowlatabadi, Hadi & Oravetz, Matthew A., 2006. "US long-term energy intensity: Backcast and projection," Energy Policy, Elsevier, vol. 34(17), pages 3245-3256, November.
    10. Yang, Zili & Sirianni, Philip, 2010. "Balancing contemporary fairness and historical justice: A 'quasi-equitable' proposal for GHG mitigations," Energy Economics, Elsevier, vol. 32(5), pages 1121-1130, September.
    11. Khanna, Neha, 2001. "Analyzing the economic cost of the Kyoto protocol," Ecological Economics, Elsevier, vol. 38(1), pages 59-69, July.
    12. Loschel, Andreas, 2002. "Technological change in economic models of environmental policy: a survey," Ecological Economics, Elsevier, vol. 43(2-3), pages 105-126, December.
    13. Ciscar, Juan Carlos & Soria, Antonio, 2002. "Prospective analysis of beyond Kyoto climate policy: a sequential game framework," Energy Policy, Elsevier, vol. 30(15), pages 1327-1335, December.
    14. Fabien Prieur & Ingmar Schumacher, 2016. "The role of conflict for optimal climate and immigration policy," Working Papers 2016.27, FAERE - French Association of Environmental and Resource Economists.

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    JEL classification:

    • F0 - International Economics - - General

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