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The Efficiency of Voluntary Pollution Abatement when Countries can Commit

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

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.

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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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Paper provided by Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University in its series CCES Discussion Paper Series with number 28.

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Length: 40 p.
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:hit:ccesdp:28
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Web page: http://www.econ.hit-u.ac.jp/~cces/

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  1. Danziger, Leif & Schnytzer, Adi, 1991. "Implementing the Lindahl voluntary-exchange mechanism," European Journal of Political Economy, Elsevier, vol. 7(1), pages 55-64, April.
  2. 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.
  3. Anke Gerber & Philipp C. Wichardt, 2008. "Providing Public Goods in the Absence of Strong Institutions," IEW - Working Papers 303, Institute for Empirical Research in Economics - University of Zurich.
  4. 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.
  5. Varian, Hal R., 1994. "Sequential contributions to public goods," Journal of Public Economics, Elsevier, vol. 53(2), pages 165-186, February.
  6. Hans Gersbach & Ralph Winkler, 2007. "On the Design of Global Refunding and Climate Change," CER-ETH Economics working paper series 07/69, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich, revised Jul 2007.
  7. Yukihiro Nishimura, 2008. "A Lindahl Solution to International Emissions Trading," Working Papers 1177, Queen's University, Department of Economics.
  8. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
  9. Shilony, Yuval, 2000. "Diversity and ingenuity in voluntary collective action," European Journal of Political Economy, Elsevier, vol. 16(3), pages 429-443, September.
  10. Guttman, Joel M, 1978. "Understanding Collective Action: Matching Behavior," American Economic Review, American Economic Association, vol. 68(2), pages 251-55, May.
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