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Agreeing on Efficient Emissions Reduction

  • Olivier Bos
  • Béatrice Roussillon
  • Paul Schweinzer

We propose a simple mechanism providing incentives to reduce harmful emissions to their efficient level without infracting upon productive efficiency. The mechanism employs a contest creating incentives among participating nations to simultaneously exert efficient productive and efficient abatement efforts. Participation in the most stylised form of the scheme is voluntary and individually rational; all rules are mutually agreeable and are unanimously adopted if proposed. The scheme balances its budget and requires no principal. In a perhaps more realistic stochastic output version which could potentially inform policy decisions, we show that the transfers required by the efficient mechanism create a mutual insurance motive which may serve as effective rationale for the (gradual) formation of International Environmental Agreements.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-07/cesifo1_wp4345.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4345.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4345
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