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Is CO2 Trading Always Beneficial? A CGE-Model Analysis on Secondary Environmental Benefits

  • Nilsson, Charlotta

    ()

    (National Institute of Economic Research)

  • Huhtala, Anni

    ()

    (National Institute of Economic Research)

The paper analyzes the cost-efficiency of trading CO2 emissions by focusing on the overall environmental impacts of active climate policy measures. When reducing CO2 emissions, other emissions, also related to the consumption of fossil fuels, decrease with no additional cost. These secondary benefits must be taken into consideration when analyzing gains from international emissions trading. The Swedish environmental target to comply with the Kyoto Protocol by reducing greenhouse gases, and two national goals to alleviate acidification and eutrofication effects by reducing SO2 and NOx pollutants are simultaneously studied in a CGE-modeling framework. The results indicate that when secondary benefits are taken into account, it may still be in the government’s interest to decrease CO2 nationally, instead of engaging in seemingly low-cost trading.

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File URL: http://www.konj.se/download/18.70c52033121865b1398800093004/WP_75.pdf
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Paper provided by National Institute of Economic Research in its series Working Paper with number 75.

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Length: 27 pages
Date of creation: 01 Jul 2000
Date of revision:
Handle: RePEc:hhs:nierwp:0075
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  1. Parry, Ian W. H. & Williams, Roberton III & Goulder, Lawrence H., 1999. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 52-84, January.
  2. Matsuo, Naoki, 1998. "Key elements related to the emissions trading for the Kyoto protocol," Energy Policy, Elsevier, vol. 26(3), pages 263-273, February.
  3. Kverndokk,S. & Rosendahl,E., 2000. "CO2 mitigation costs and ancillary benefits in the Nordic countries, the UK and Ireland : a survey," Memorandum 34/2000, Oslo University, Department of Economics.
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