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Valuing Equally the Environmental Goods in Rich and Poor Countries in a Post-Kyoto World

  • Dritan Osmani

    ()

    (Hamburg University and Center for Atmospheric Science, Hamburg, Germany)

The optimal pollution abatement levels are found by maximizing global social welfare in a permits trade system under the constraint that environmental goods are evaluated equally in rich and poor countries. Evaluating equally environmental goods in poor and rich countries makes possible to build a relation between the income elasticity of marginal utility e and the inequality aversion parameter gamma (Fankhauser et al. 1997; Johansson-Stenman 2000), which narrows the variation of e for a particular value of gamma. As a result, smaller variation for optimal abatement levels is obtained, which allows to inspect what Post-Kyoto abatement levels for poor and rich countries respect the requirement of evaluating equally the environmental goods in rich and poor countries. One finding is that in a Post-Kyoto world, the optimal abatement levels of poor countries are always different from zero, if we aim to evaluate equally the environmental goods in poor and rich countries. Furthermore, in a permits trade sy stem, if we increase abatement levels continually, it can happen that poor countries have to carry out higher emission reductions than rich ones.

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Article provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its journal Czech Economic Review.

Volume (Year): 7 (2013)
Issue (Month): 2 (July)
Pages: 073-099

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Handle: RePEc:fau:aucocz:au2013_073
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