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


  • Chichilnisky, Graciela

    (Columbia University)

  • Hammond, Peter J.

    (University of Warwick)


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

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    References listed on IDEAS

    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.
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    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.
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    More about this item


    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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