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Internationally Coordinated Emission Permit Policies: An Option for Withdrawers from the Kyoto Protocol?

  • Birgit Bednar-Friedl
  • Karl Farmer

This paper investigates the welfare costs of unilateral versus internationally coordinated emission permit policies in a two-country overlapping generations model with producer carbon emissions. We show that, for a net foreign debtor country, the domestic welfare costs of a unilateral domestic permit policy are larger than of an internationally coordinated policy if the world economy is dynamically efficient. From the perspective of a net foreign debtor country that has withdrawn from the Kyoto Protocol, an internationally coordinated permit policy is dominated by climate political inaction also in the post-Kyoto era since bearing the costs of foreign actionism is cheaper, in terms of welfare, than agreeing on international policy coordination unless the world economy becomes dynamically inefficient.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2764.

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Date of creation: 2009
Date of revision:
Handle: RePEc:ces:ceswps:_2764
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  1. Torsten Persson, 1983. "Deficits and Intergenerational Welfare in Open Economies," NBER Working Papers 1083, National Bureau of Economic Research, Inc.
  2. Maurice Obstfeld, 1988. "Fiscal Deficits and Relative Prices in a Growing World Economy," NBER Working Papers 2725, National Bureau of Economic Research, Inc.
  3. Brian R. Copeland & M. Scott Taylor, 2000. "Free Trade and Global Warming: A Trade Theory View of the Kyoto Protocol," NBER Working Papers 7657, National Bureau of Economic Research, Inc.
  4. Tetsuo Ono, 2002. "The Effects of Emission Permits on Growth and the Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 21(1), pages 75-87, January.
  5. Birgit Bednar-Friedl & Karl Farmer & Andreas Rainer, 2010. "Effects of Unilateral Climate Policy on Terms of Trade, Capital Accumulation, and Welfare in a World Economy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 47(4), pages 495-520, December.
  6. Ghosh, Atish R., 1992. "Fiscal policy, the terms of trade, and the external balance," Journal of International Economics, Elsevier, vol. 33(1-2), pages 105-125, August.
  7. Frenkel, Jacob A & Razin, Assaf, 1986. "The International Transmission and Effects of Fiscal Policies," American Economic Review, American Economic Association, vol. 76(2), pages 330-35, May.
  8. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120.
  9. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249.
  10. Lipton, David & Sachs, Jeffrey, 1983. "Accumulation and growth in a two-country model : A simulation approach," Journal of International Economics, Elsevier, vol. 15(1-2), pages 135-159, August.
  11. Weber, Christopher L. & Peters, Glen P., 2009. "Climate change policy and international trade: Policy considerations in the US," Energy Policy, Elsevier, vol. 37(2), pages 432-440, February.
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