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A Credible Foundation For Long Term International Cooperation On Climate Change

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  • Warwick J. McKibbin
  • Peter J. Wilcoxen

Abstract

To succeed in reducing carbon dioxide emissions, a climate policy must establish credible long-term incentives for investments in new energy-sector capital and in research and development. We argue that credibility implies that international agreements should focus on enhancing coordination and collaboration between countries, rather than on coercion. At the national level, credibility requires political and economic incentives that can be provided by long-term tradable emissions permits, but it needs more flexibility than can be provided by a conventional permit system. We argue that the best mechanism for providing credible long-term incentives is a hybrid system of long and short term emissions permits. Key aspects of the system would be coordinated across countries but the permits would be issued and traded solely within national borders.

Suggested Citation

  • Warwick J. McKibbin & Peter J. Wilcoxen, 2006. "A Credible Foundation For Long Term International Cooperation On Climate Change," CAMA Working Papers 2006-15, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2006-15
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2017-02/15_mckibbin_wilcoxen_2006.pdf
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    References listed on IDEAS

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    1. Martin L. Weitzman, 1974. "Prices vs. Quantities," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 477-491.
    2. McKibbin, Warwick J. & Shackleton, Robert & Wilcoxen, Peter J., 1999. "What to expect from an international system of tradable permits for carbon emissions," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 319-346, August.
    3. Richard S.J. Tol, 1999. "Kyoto, Efficiency, and Cost-Effectiveness: Applications of FUND," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 131-156.
    4. Newell, Richard G. & Pizer, William A., 2003. "Regulating stock externalities under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 416-432, March.
    5. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
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    Cited by:

    1. Aviel Verbruggen, 2011. "Preparing the design of robust climate policy architectures," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 11(4), pages 275-295, November.
    2. Valentina Bosetti & Jeffrey Frankel, 2014. "Sustainable Cooperation In Global Climate Policy: Specific Formulas And Emission Targets," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 5(03), pages 1-34.
    3. Joseph E. Aldy & William A. Pizer, 2009. "Issues in Designing U.S. Climate Change Policy," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 179-210.
    4. Valentina Bosetti & Carlo Carraro & Alessandra Sgobbi & Massimo Tavoni, 2008. "Modelling Economic Impacts of Alternative International Climate Policy Architectures. A Quantitative and Comparative Assessment of Architectures for Agreement," Working Papers 2008.85, Fondazione Eni Enrico Mattei.
    5. Frankel, Jeffrey A. & Bosetti, Valentina, 2011. "Politically Feasible Emission Target Formulas to Attain 460 ppm CO[subscript 2] Concentrations," Working Paper Series rwp11-016, Harvard University, John F. Kennedy School of Government.
    6. Aldy, Joseph E. & Ley, Eduardo & Parry, Ian, 2008. "A Tax–Based Approach to Slowing Global Climate Change," National Tax Journal, National Tax Association, vol. 61(3), pages 493-517, September.
    7. Valentina Bosetti & Jeffrey Frankel, 2011. "Sustainable Cooperation in Global Climate Policy: Specific Formulas and Emission Targets to Build on Copenhagen and Cancun," Working Papers 2011.66, Fondazione Eni Enrico Mattei.
    8. William Whitesell, 2007. "Carbon taxes, cap-and-trade administration, and US legislation," Climate Policy, Taylor & Francis Journals, vol. 7(5), pages 457-462, September.
    9. Mathews, John, 2007. "Seven steps to curb global warming," Energy Policy, Elsevier, vol. 35(8), pages 4247-4259, August.
    10. Alice Favero & Enrica De Cian, 2010. "Fairness, Credibility and Effectiveness in the Copenhagen Accord: An Economic Assessment," Working Papers 2010.21, Fondazione Eni Enrico Mattei.
    11. Frankel, Jeffrey, 2007. "Formulas for Quantitative Emission Targets," Working Paper Series rwp07-011, Harvard University, John F. Kennedy School of Government.

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