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International Emission Permit Markets with Refunding

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  • Gersbach, Hans
  • Winkler, Ralph

Abstract

We propose a blueprint for an international emission permit market such as the EU trading scheme. Each country decides on the amount of permits it wants to offer. A fraction of these permits is grandfathered, the remainder is auctioned. Revenues from the auction are collected in a global fund and reimbursed to member countries in fixed proportions. We show that international permit markets with refunding lead to outcomes in which all countries tighten the issuance of permits and are better off compared to standard international permit markets. If the share of grandfathered permits is sufficiently small, we obtain approximately socially optimal emission reductions.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7035.

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Date of creation: Nov 2008
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Handle: RePEc:cpr:ceprdp:7035
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Keywords: climate change mitigation; global refunding scheme; international agreements; international permit markets; tradeable permits;

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Find related papers by JEL classification:
  • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
  • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
  • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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  1. Gersbach, Hans & Winkler, Ralph, 2007. "On the Design of Global Refunding and Climate Change," CEPR Discussion Papers 6379, C.E.P.R. Discussion Papers.
  2. Ian A. MacKenzie,, 2008. "On the Sequential Choice of Tradable Permit Allocations," CER-ETH Economics working paper series 08/83, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
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Cited by:

  1. Susumu Cato, 2010. "Emission Taxes and Optimal Refunding Schemes with Endogenous Market Structure," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(3), pages 275-280, July.
  2. repec:zbw:hohpro:341 is not listed on IDEAS
  3. Carsten Helm & Stefan Pichler, 2011. "Climate Policy with Technology Transfers and Permit Trading," Working Papers V-341-11, University of Oldenburg, Department of Economics, revised Nov 2011.
  4. Fuhai Hong & Susheng Wang, 2012. "Climate Policy, Learning, and Technology Adoption in Small Countries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(3), pages 391-411, March.
  5. Gersbach, Hans & Winkler, Ralph, 2008. "International Emission Permit Markets with Refunding," CEPR Discussion Papers 7035, C.E.P.R. Discussion Papers.
  6. Balistreri, Edward J. & Hillberry, Russell H. & Rutherford, Thomas F., 2010. "Trade and welfare: Does industrial organization matter?," Economics Letters, Elsevier, vol. 109(2), pages 85-87, November.
  7. Olivier Bos & Béatrice Roussillon & Paul Schweinzer, 2013. "Agreeing on Efficient Emissions Reduction," CESifo Working Paper Series 4345, CESifo Group Munich.
  8. Mads Greaker & Cathrine Hagem, 2014. "Strategic Investment in Climate Friendly Technologies: The Impact of Global Emissions Trading," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(1), pages 65-85, September.
  9. Gersbach, Hans & Winkler, Ralph, 2012. "Global refunding and climate change," Journal of Economic Dynamics and Control, Elsevier, vol. 36(11), pages 1775-1795.
  10. Fabio Sferra & Massimo Tavoni, 2013. "Endogenous Participation in a Partial Climate Agreement with Open Entry: A Numerical Assessment," Working Papers 2013.60, Fondazione Eni Enrico Mattei.
  11. Buchholz, Wolfgang & Cornes, Richard & Rübbelke, Dirk, 2011. "Interior matching equilibria in a public good economy: An aggregative game approach," Journal of Public Economics, Elsevier, vol. 95(7), pages 639-645.
  12. repec:old:wpaper:341 is not listed on IDEAS
  13. Hans Gersbach & Quirin Oberpriller, 2012. "Rules vs. Targets: Climate Treaties under Uncertainty," CER-ETH Economics working paper series 12/159, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  14. Peyman Khezr & Ian A. MacKenzie, 2016. "Consignment auctions," Discussion Papers Series 558, School of Economics, University of Queensland, Australia.
  15. Goeschl, Timo & Perino, Grischa, 2015. "The Climate Policy Hold-Up: Green Technologies,Intellectual Property Rights, and the Abatement Incentives of International Agreements," Working Papers 0591, University of Heidelberg, Department of Economics.

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