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Regional burden sharing of GHG mitigation policies in a decentralized federation

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  • Arif, Faisal
  • Dissou, Yazid

Abstract

The distribution of the burden of cost of GHG mitigation policies is a contentious issue. This is particularly true among regional jurisdictions within a federal country with decentralized power. The regional allocation of emissions permits could hinder the political feasibility of national GHG mitigation policies. We build a multi-region computable general equilibrium (CGE) model to assess the implications of different burden sharing rules in a hypothetical national GHG abatement policy with a market-based instrument. In addition to assessing the impacts of regional permit allocation rules that entail inter-regional transfers of wealth, we consider a particular emissions allocation scheme, called ‘no prior entitlement’ (NPE), that avoids such transfers. The insights derived from the simulations suggest that the NPE policy avoids the politically contentious issues of inter-regional transfers of scarcity rents. Its welfare impact lies between those in the entitlement-based permit allocation schemes.

Suggested Citation

  • Arif, Faisal & Dissou, Yazid, 2016. "Regional burden sharing of GHG mitigation policies in a decentralized federation," Economic Modelling, Elsevier, vol. 52(PB), pages 390-399.
  • Handle: RePEc:eee:ecmode:v:52:y:2016:i:pb:p:390-399
    DOI: 10.1016/j.econmod.2015.09.017
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    References listed on IDEAS

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    1. Richard G. Newell & William A. Pizer & Daniel Raimi, 2014. "Carbon Markets: Past, Present, and Future," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 191-215, October.
    2. Boucekkine, Raouf & Krawczyk, Jacek B. & Vallée, Thomas, 2010. "Towards an understanding of tradeoffs between regional wealth, tightness of a common environmental constraint and the sharing rules," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1813-1835, September.
    3. Fischer, Carolyn & Fox, Alan K., 2004. "Output-Based Allocations of Emissions Permits: Efficiency and Distributional Effects in a General Equilibrium Setting with Taxes and Trade," Discussion Papers 10654, Resources for the Future.
    4. Boucekkine Raouf & Germain Marc, 2009. "The Burden Sharing of Pollution Abatement Costs in Multi-Regional Open Economies," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-34, June.
    5. Asbjørn Torvanger & Lasse Ringius, 2002. "Criteria for Evaluation of Burden-sharing Rules in International Climate Policy," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 2(3), pages 221-235, September.
    6. Gupta, Sujata & M Bhandari, Preety, 1999. "An effective allocation criterion for CO2 emissions," Energy Policy, Elsevier, vol. 27(12), pages 727-736, November.
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    Cited by:

    1. repec:spr:inrvec:v:65:y:2018:i:3:d:10.1007_s12232-018-0299-6 is not listed on IDEAS
    2. Annicchiarico, Barbara & Battles, Susan & Di Dio, Fabio & Molina, Pierfrancesco & Zoppoli, Pietro, 2017. "GHG mitigation schemes and energy policies: A model-based assessment for the Italian economy," Economic Modelling, Elsevier, vol. 61(C), pages 495-509.

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