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Joint implementation under asymmetric information and strategic behavior

  • Cathrine Hagem
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    Joint Implementation (JI) under the Framework Convention on Climate Change means that countries could partly offset their national abatement commitments by investing in CO 2 abatement projects abroad. JI is introduced as a mechanism for achieving a certain global abatement target less costly by separating the commitments from the implementation of measures. This paper studies the design of a JI contract when the investor has incomplete information about the foreign firm which carries out the JI project (the host). Asymmetric information leads to a decrease in the potential cost savings from JI. Furthermore, private information held by the potential host firm could give the firm a significant positive utility of participating in JI projects. The possibility of being a host for a JI project in the future can prevent potential host firms from investing in profitable abatement projects today. The paper analyzes the impact on emissions of CO 2 of strategic behavior among potential hosts for JI projects. Copyright Kluwer Academic Publishers 1996

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

    Volume (Year): 8 (1996)
    Issue (Month): 4 (December)
    Pages: 431-447

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    Handle: RePEc:kap:enreec:v:8:y:1996:i:4:p:431-447
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    1. John Pezzey, 1992. "Analysis of Unilateral CO2 Control in the European Community and OECD," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 159-172.
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