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Fairness in a tradeable-permit treaty for carbon emissions reductions in Europe and the former Soviet Union

  • Peter Bohm
  • Bjorn Larsen
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    This paper evaluates the distributional implications of alternative permit allocations in a tradeable permit regime for carbon emissions reductions (20% below baseline) in 2010 for a region consisting of Europe and the states of the former Soviet Union (FSU). Participation in such a regime is expected to hinge on the “fairness” of the distributional consequences. We find that initial permit allocations by populationand/or GDP are unlikely to induce participation by most countries of Eastern Europe and FSU because of the net costs involved. We identify a set of initial allocations that would at least compensate these countries. A fair treatment of the countries in Western Europe (WE) is here one which equalizes net costs perGDP. For a wide set of cost functions for carbon emission reductions, the cost gains that WE would reap from a tradeable permit system relative to unilateral reductions by WE as a group are found to be on the order of 85 percent. This would imply, among other things, a significant increase in WE'scapacity to make further emissions reductions. Copyright Kluwer Academic Publishers 1994

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    Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

    Volume (Year): 4 (1994)
    Issue (Month): 3 (June)
    Pages: 219-239

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    Handle: RePEc:kap:enreec:v:4:y:1994:i:3:p:219-239
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    1. Alan S. Manne & Richard G. Richels, 1991. "Global CO2 Emission Reductions - the Impacts of Rising Energy Costs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 87-108.
    2. Hoel, M., 1989. "Global Environmental Problems: The Effects Of Unilateral Actions Taken By One Country," Memorandum 11/1989, Oslo University, Department of Economics.
    3. Larsen, Bjorn & Shah, Anwar & DEC, 1992. "World fossil fuel subsidies and global carbon emissions," Policy Research Working Paper Series 1002, The World Bank.
    4. Hoel, M., 1990. "Efficient International Agreements For Reducing Emissions Of Co2," Memorandum 06/1990, Oslo University, Department of Economics.
    5. Peter Bohm, 1992. "Distributional Implications of Allowing International Trade in CO, Emission Quotas," The World Economy, Wiley Blackwell, vol. 15(1), pages 107-114, 01.
    6. Peter Hoeller & Markku Wallin, 1991. "Energy Prices, Taxes and Carbon Dioxide Emissions," OECD Economics Department Working Papers 106, OECD Publishing.
    7. Peter Hoeller & Jonathan Coppel, 1992. "Energy Taxation and Price Distortions in Fossil Fuel Markets: Some Implications for Climate Change Policy," OECD Economics Department Working Papers 110, OECD Publishing.
    8. William D. Nordhaus, 1991. "The Cost of Slowing Climate Change: a Survey," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 37-66.
    9. James M. Poterba, 1991. "Tax Policy to Combat Global Warming: On Designing a Carbon Tax," NBER Working Papers 3649, National Bureau of Economic Research, Inc.
    10. Anwar Shah & Bjorn Larsen, 2014. "Carbon taxes, the greenhouse effect, and developing countries," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 353-402, May.
    11. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-48, July.
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