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Strategic Choice of International Emissions Trading Scheme in an Open Economy with Perfect Competition

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  • Boom, Jan Tjeerd

Abstract

Emissions trading can be organized in several ways. In particular, private emissions trading can be organized as permit trading, or as credit trading. The schemes have a different impact on output with credit trading leading to a higher output level than permit trading. This paper analyzes what the optimal choice of emissions trading scheme is in a model with international trade and perfect competition in the product and emission quota market. Furthermore, I discuss whether it is optimal for the country to allow its firms to trade emissions internationally. The paper shows that countries want to use these schemes in different circumstances, depending on whether they import or export the good. Furthermore, it is shown that in several cases, countries maximize their welfare by not allowing international emissions trading.

Suggested Citation

  • Boom, Jan Tjeerd, 2003. "Strategic Choice of International Emissions Trading Scheme in an Open Economy with Perfect Competition," Unit of Economics Working Papers 24196, Royal Veterinary and Agricultural University, Food and Resource Economic Institute.
    • Handle: RePEc:ags:rvaewp:24196
    DOI: 10.22004/ag.econ.24196
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    References listed on IDEAS

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    1. Bouwe R. Dijkstra, 1999. "The Political Economy of Environmental Policy," Books, Edward Elgar Publishing, number 1636.
    2. Boom, Jan-Tjeerd, 2001. "International emissions trading under the Kyoto Protocol: : credit trading," Energy Policy, Elsevier, vol. 29(8), pages 605-613, June.
    3. Krutilla, Kerry, 1991. "Environmental regulation in an open economy," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 127-142, March.
    4. Michael Faure & Joyeeta Gupta & Andries Nentjes (ed.), 2003. "Climate Change and the Kyoto Protocol," Books, Edward Elgar Publishing, number 2968.
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