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The Efficiency of Voluntary Pollution Abatement when Countries can Commit

Author

Listed:
  • Boadway, Robin
  • Song, Zhen
  • Tremblay, Jean-François

Abstract

We characterize a mechanism for reducing pollution emissions in which countries, acting non-cooperatively, commit to match each others’ abatement levels and may subsequently engage in emissions quota trading. The mechanism leads to an efficient level of emissions, and if the matching abatements process includes a quota trading stage, the marginal benefits of emissions are also equalized across countries. Given equilibrium matching rates, the initial allocation of emission quotas (before trading) reflects each country’s marginal valuation for lower pollution relative to its marginal benefit from emissions. These results hold for any number of countries, in an environment where countries have different abatement technologies and different benefits from emissions, and even if the emissions of countries are imperfect substitutes in each country’s damage function. In a dynamic twoperiod setting, the mechanism achieves both intra-temporal and inter-temporal efficiency. We extend the model by assuming that countries are voluntarily contributing to an international public good, in addition to undertaking pollution abatements, and find that the level of emissions may be efficient even without any matching abatement commitments, and the marginal benefits of emissions may be equalized across countries even without quota trading.

Suggested Citation

  • Boadway, Robin & Song, Zhen & Tremblay, Jean-François, 2010. "The Efficiency of Voluntary Pollution Abatement when Countries can Commit," CCES Discussion Paper Series 28, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
  • Handle: RePEc:hit:ccesdp:28
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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/18327/1/n070ccesDP_28.pdf
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    References listed on IDEAS

    as
    1. Boadway, Robin & Song, Zhen & Tremblay, Jean-Francois, 2007. "Commitment and matching contributions to public goods," Journal of Public Economics, Elsevier, vol. 91(9), pages 1664-1683, September.
    2. Martin Altemeyer-Bartscher & Dirk T. G. Rübbelke & Eytan Sheshinski, 2010. "Environmental Protection and the Private Provision of International Public Goods," Economica, London School of Economics and Political Science, vol. 77(308), pages 775-784, October.
    3. Guttman, Joel M, 1978. "Understanding Collective Action: Matching Behavior," American Economic Review, American Economic Association, vol. 68(2), pages 251-255, May.
    4. Gerber, Anke & Wichardt, Philipp C., 2009. "Providing public goods in the absence of strong institutions," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 429-439, April.
    5. Danziger, Leif & Schnytzer, Adi, 1991. "Implementing the Lindahl voluntary-exchange mechanism," European Journal of Political Economy, Elsevier, vol. 7(1), pages 55-64, April.
    6. Yukihiro Nishimura, 2008. "A Lindahl Solution to International Emissions Trading," Working Papers 1177, Queen's University, Department of Economics.
    7. Shilony, Yuval, 2000. "Diversity and ingenuity in voluntary collective action," European Journal of Political Economy, Elsevier, vol. 16(3), pages 429-443, September.
    8. Gersbach, Hans & Winkler, Ralph, 2007. "On the Design of Global Refunding and Climate Change," CEPR Discussion Papers 6379, C.E.P.R. Discussion Papers.
    9. Varian, Hal R., 1994. "Sequential contributions to public goods," Journal of Public Economics, Elsevier, vol. 53(2), pages 165-186, February.
    10. 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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    Citations

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    Cited by:

    1. Wood, Peter John, 2010. "Climate Change and Game Theory: a Mathematical Survey," Working Papers 249379, Australian National University, Centre for Climate Economics & Policy.
    2. Hans-Peter Weikard & Leo Wangler & Andreas Freytag, 2015. "Minimum Participation Rules with Heterogeneous Countries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 711-727, December.
    3. Chen, Cuicui & Zeckhauser, Richard, 2016. "Collective Action in an Asymmetric World," Working Paper Series 16-019, Harvard University, John F. Kennedy School of Government.
    4. Wolfgang Buchholz & Richard Cornes & Dirk Rübbelke, 2014. "Potentially Harmful International Cooperation on Global Public Good Provision," Economica, London School of Economics and Political Science, vol. 81(322), pages 205-223, April.
    5. 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.
    6. Boadway, Robin & Song, Zhen & Tremblay, Jean-François, 2013. "Non-cooperative pollution control in an inter-jurisdictional setting," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 783-796.
    7. Martin Altemeyer-Bartscher & Anil Markandya & Dirk T.G. Rübbelke, 2011. "The Private Provision of International Impure Public Goods: the Case of Climate Policy," Working Papers 2011-09, BC3.
    8. Guttman, Joel M., 2013. "On the evolution of conditional cooperation," European Journal of Political Economy, Elsevier, vol. 30(C), pages 15-34.
    9. Olivier Bos & Béatrice Roussillon & Paul Schweinzer, 2016. "Agreeing on Efficient Emissions Reduction," Scandinavian Journal of Economics, Wiley Blackwell, vol. 118(4), pages 785-815, October.
    10. repec:eee:pubeco:v:158:y:2018:i:c:p:103-112 is not listed on IDEAS
    11. Andreas Löschel & Dirk Rübbelke, 2014. "On the Voluntary Provision of International Public Goods," Economica, London School of Economics and Political Science, vol. 81(322), pages 195-204, April.
    12. Weifeng Liu, 2014. "Pareto Improvements under Matching Mechanisms in a Public Good Economy," CAMA Working Papers 2014-63, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    13. repec:spr:grdene:v:23:y:2014:i:3:d:10.1007_s10726-013-9354-6 is not listed on IDEAS

    More about this item

    Keywords

    Voluntary pollution abatement; matching commitments; emissions quota trading;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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