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The Kyoto Protocol and Beyond: Pareto Improvements to Policies that Mitigate Climate Change

Author

Listed:
  • Chichilnisky, Graciela

    (Columbia University)

  • Hammond, Peter J.

    (University of Warwick)

Abstract

Article 17 of the Kyoto Protocol allowed emissions trading; Article 12 defined a Clean Development Mechanism (CDM). In a simple theoretical model we adapt standard gains from trade results to demonstrate that, relative to any status quo with specified worldwide aggregate emissions: first, emissions trading with a suitable international distribution of permit rights generally allows each nation more consumption while aggregate emissions remain constant; second, the CDM generally adds to these efficiency gains by reducing further the total cost of achieving any target worldwide emissions level. The provisions of the 2015 Paris Agreement that grant credit for carbon removals allow even further potential gains. Contrary to some claims, the Kyoto Protocol is not “defunct”; instead, retaining its key provisions of emissions trade and the CDM while including credit for carbon removals could make emissions reductions much more affordable. Yet an essential part of the institutional background required to make international trade in emissions permits function well has been destroyed by the Paris Agreement, since it lacks mandatory limits of the kind that the Kyoto Protocol imposed.

Suggested Citation

  • Chichilnisky, Graciela & Hammond, Peter J., 2016. "The Kyoto Protocol and Beyond: Pareto Improvements to Policies that Mitigate Climate Change," CAGE Online Working Paper Series 287, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:287
    as

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    File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/287-2016_hammond.pdf
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    References listed on IDEAS

    as
    1. Hammond, Peter J & Sempere, Jaime, 1995. "Limits to the Potential Gains from Economic Integration and Other Supply Side Policies," Economic Journal, Royal Economic Society, vol. 105(432), pages 1180-1204, September.
    2. Chichilnisky, Graciela & Heal, Geoffrey, 1994. "Who should abate carbon emissions? : An international viewpoint," Economics Letters, Elsevier, vol. 44(4), pages 443-449, April.
    3. John P. Weyant, 1993. "Costs of Reducing Global Carbon Emissions," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 27-46, Fall.
    4. Graciela Chichilnisky & Peter Eisenberger, 2009. "Energy security, economic development and global warming: addressing short and long term challenges," International Journal of Green Economics, Inderscience Enterprises Ltd, vol. 3(3/4), pages 414-446.
    5. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    6. Graciela Chichilnisky, 2011. "Green capitalism: negative carbon and the green power fund," International Journal of Green Economics, Inderscience Enterprises Ltd, vol. 5(4), pages 321-333.
    7. Dixit, Avinash & Norman, Victor, 1986. "Gains from trade without lump-sum compensation," Journal of International Economics, Elsevier, vol. 21(1-2), pages 111-122, August.
    8. Peter M. Eisenberger & Roger W. Cohen & Graciela Chichilnisky & Nicholas M. Eisenberger & Ronald R. Chance & Christopher W. Jones, 2009. "Global Warming and Carbon-Negative Technology: Prospects for a Lower-Cost Route to a Lower-Risk Atmosphere," Energy & Environment, , vol. 20(6), pages 973-984, October.
    9. T. Gasser & Céline Guivarch & K. Tachiiri & C. D. Jones & P. Ciais, 2015. "Negative emissions physically needed to keep global warming below 2 °C," Post-Print hal-01188788, HAL.
    10. Kristen A. Sheeran, 2006. "Who Should Abate Carbon Emissions? A Note," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 35(2), pages 89-98, October.
    11. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
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    More about this item

    Keywords

    carbon dioxide emissions; Kyoto Protocol; Paris Agreement; emissions trade; clean development mechanism; gains from trade; carbon removals JEL Classification: Q54; Q56; D62; D61;

    JEL classification:

    • 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
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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