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Sectoral and Regional Expansion of Emissions Trading

Author

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  • Christoph Böhringer

    (Department of Economics, University of Oldenburg)

  • Dijkstra Bouwe

    (University of Nottingham)

  • Knut Einar Rosendahl

    (Research Department, Statistics Norway)

Abstract

We consider an international emissions trading scheme with partial sectoral and regional coverage. Sectoral and regional expansion of the trading scheme is beneficial in aggregate, but not necessarily for individual countries. We simulate international CO2 emission quota markets using marginal abatement cost functions and the Copenhagen 2020 climate policy targets for selected countries that strategically allocate emissions in a bid to manipulate the quota price. Quota exporters and importers generally have conflicting interests about admitting more countries to the trading coalition, and our results indicate that some countries may lose substantially when the coalition expands in terms of new countries. For a given coalition, expanding sectoral coverage makes most countries better off, but some countries (notably the USA and Russia) may lose out due to loss of strategic advantages. In general, exporters tend to have stronger strategic power than importers.

Suggested Citation

  • Christoph Böhringer & Dijkstra Bouwe & Knut Einar Rosendahl, 2011. "Sectoral and Regional Expansion of Emissions Trading," Working Papers V-337-11, University of Oldenburg, Department of Economics, revised Jun 2011.
    • Handle: RePEc:old:dpaper:337-11
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    Cited by:

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    8. Idiano D’Adamo, 2018. "The Profitability of Residential Photovoltaic Systems. A New Scheme of Subsidies Based on the Price of CO 2 in a Developed PV Market," Social Sciences, MDPI, vol. 7(9), pages 1-21, August.
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    10. Jan Abrell & Sebastian Rausch & Hidemichi Yonezawa, 2019. "Higher Price, Lower Costs? Minimum Prices in the EU Emissions Trading Scheme," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(2), pages 446-481, April.
    11. Pang, Jun & Timilsina, Govinda, 2021. "How would an emissions trading scheme affect provincial economies in China: Insights from a computable general equilibrium model," Renewable and Sustainable Energy Reviews, Elsevier, vol. 145(C).
    12. Ai, Hongshan & Zhou, Zhengqing & Li, Ke & Kang, Zhi-Yong, 2021. "Impacts of the desulfurization price subsidy policy on SO2 reduction: Evidence from China's coal-fired power plants," Energy Policy, Elsevier, vol. 157(C).
    13. Borissov, Kirill & Bretschger, Lucas, 2022. "Optimal carbon policies in a dynamic heterogeneous world," European Economic Review, Elsevier, vol. 148(C).
    14. Johannes Ziesmer & Ding Jin & Sneha D Thube & Christian Henning, 2023. "A Dynamic Baseline Calibration Procedure for CGE models," Computational Economics, Springer;Society for Computational Economics, vol. 61(4), pages 1331-1368, April.
    15. Huiqin Jiang & Xinxiao Shao & Xiao Zhang & Jianqiang Bao, 2017. "A Study of the Allocation of Carbon Emission Permits among the Provinces of China Based on Fairness and Efficiency," Sustainability, MDPI, vol. 9(11), pages 1-17, November.
    16. Xia, Yan & Tang, Zhipeng, 2017. "The impacts of emissions accounting methods on an imperfect competitive carbon trading market," Energy, Elsevier, vol. 119(C), pages 67-76.
    17. Burmeister, Johannes & Peterson, Sonja, 2016. "National climate policies in times of the European Union Emissions Trading System (EU ETS)," Kiel Working Papers 2052, Kiel Institute for the World Economy (IfW Kiel).
    18. Baochen Yang & Chuanze Liu & Yunpeng Su & Xin Jing, 2017. "The Allocation of Carbon Intensity Reduction Target by 2020 among Industrial Sectors in China," Sustainability, MDPI, vol. 9(1), pages 1-19, January.
    19. Baochen Yang & Chuanze Liu & Zehao Gou & Jiacheng Man & Yunpeng Su, 2018. "How Will Policies of China’s CO 2 ETS Affect its Carbon Price: Evidence from Chinese Pilot Regions," Sustainability, MDPI, vol. 10(3), pages 1-26, February.
    20. Wang, Xu & Zhu, Lei & Fan, Ying, 2018. "Transaction costs, market structure and efficient coverage of emissions trading scheme: A microlevel study from the pilots in China," Applied Energy, Elsevier, vol. 220(C), pages 657-671.
    21. Böhringer, Christoph & Fischer, Carolyn, 2023. "Tax, kill or bill: An analysis of unilateral CO2 price floor options in multilateral emissions trading systems," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).

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    More about this item

    Keywords

    Emissions Trading; Allocation of Quotas; Strategic Behavior;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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