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How to Boost Countries’ Climate Ambitions: Turning Gains from Emissions Trading into Gains for Climate

Author

Listed:
  • Christoph Böhringer
  • Carsten Helm
  • Laura Schürer

Abstract

The Nationally Determined Contributions (NDCs) under the Paris Agreement fall short of the abatement needed to reach the 2°C target. Emissions trading could be a “costless” means to reduce the ambition gap if countries used their gains from trade for additional abatement. However, this requires cooperative behavior. We show that with emissions trading, countries’ non-cooperative choices of emissions reduction contributions can lead to even more abatement, provided that these contributions may not be lower than initial NDCs. Intuitively, countries with high climate damages raise their contributions if they can meet them partly through abatement in countries with low abatement costs.

Suggested Citation

  • Christoph Böhringer & Carsten Helm & Laura Schürer, 2023. "How to Boost Countries’ Climate Ambitions: Turning Gains from Emissions Trading into Gains for Climate," CESifo Working Paper Series 10624, CESifo.
    • Handle: RePEc:ces:ceswps:_10624
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    2. Christoph Böhringer & Carsten Helm & Laura Schürer, 2025. "Bridging the Ambition Gap in Climate Policy: The Emissions Reduction Potential of Bilateral Emissions Trading Under Article 6.2 of the Paris Agreement," CESifo Working Paper Series 12170, CESifo.

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    Keywords

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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