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The efficiency of voluntary pollution abatement when countries can commit

  • Boadway, Robin
  • Song, Zhen
  • Tremblay, Jean-François

We characterize a mechanism for reducing pollution emissions in which countries, acting non-cooperatively, commit to matching each others' abatement levels and may subsequently engage in emissions quota trading. The mechanism leads to an efficient level of emissions, and if the matching abatements process includes a quota trading stage, the marginal benefits of emissions are also equalized across countries. Given equilibrium matching rates, the initial allocation of emission quotas (before trading) reflects each country's marginal valuation for lower pollution relative to its marginal benefit from emissions. These results hold for any number of countries, in an environment where countries have different abatement technologies and different benefits from emissions, and even if the emissions of countries are imperfect substitutes in each country's damage function. In a two-period setting, the mechanism achieves both intra- and inter-temporal efficiency.

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Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 27 (2011)
Issue (Month): 2 (June)
Pages: 352-368

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Handle: RePEc:eee:poleco:v:27:y:2011:i:2:p:352-368
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

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  1. Shilony, Yuval, 2000. "Diversity and ingenuity in voluntary collective action," European Journal of Political Economy, Elsevier, vol. 16(3), pages 429-443, September.
  2. Danziger, Leif & Schnytzer, Adi, 1991. "Implementing the Lindahl voluntary-exchange mechanism," European Journal of Political Economy, Elsevier, vol. 7(1), pages 55-64, April.
  3. Robin Boadway & Zhen Song & Jean-Francois Tremblay, 2006. "Commitment and Matching Contributions to Public Goods," Working Papers 1067, Queen's University, Department of Economics.
  4. Guttman, Joel M, 1978. "Understanding Collective Action: Matching Behavior," American Economic Review, American Economic Association, vol. 68(2), pages 251-55, May.
  5. Varian, Hal R., 1994. "Sequential contributions to public goods," Journal of Public Economics, Elsevier, vol. 53(2), pages 165-186, February.
  6. Hans Gersbach & Ralph Winkler, 2007. "On the Design of Global Refunding and Climate Change," CER-ETH Economics working paper series 07/69, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich, revised Jul 2007.
  7. Martin Altemeyer-Bartscher & Dirk T. G. Rübbelke & Eytan Sheshinski, 2010. "Environmental Protection and the Private Provision of International Public Goods," Economica, London School of Economics and Political Science, vol. 77(308), pages 775-784, October.
  8. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
  9. Anke Gerber & Philipp C. Wichardt, 2008. "Providing Public Goods in the Absence of Strong Institutions," IEW - Working Papers 303, Institute for Empirical Research in Economics - University of Zurich.
  10. Yukihiro Nishimura, 2008. "A Lindahl Solution to International Emissions Trading," Working Papers 1177, Queen's University, Department of Economics.
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