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A Lindahl Solution To International Emissions Trading

Author

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  • Yukihiro Nishimura

    (Yokohama National University and Queen's University)

Abstract

We consider international negotiations on the level of global pollution, and examine the Lindahl solution which determines the distribution of the pollution permits with unanimous agreement. We show various properties to clarify difficulties to achieve a Pareto efficient allocation as an agreement. The Lindahl solution may result in an unfair allocation, and it does not belong to the $\gamma$-core as in other solutions based on emissions trading. On the other hand, we provide mechanisms that implement the Lindahl solution as the subgame-perfect equilibrium. We also consider the market with region-specific prices as a device to induce second-best Pareto efficient allocations.

Suggested Citation

  • Yukihiro Nishimura, 2008. "A Lindahl Solution To International Emissions Trading," Working Paper 1177, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1177
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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1177.pdf
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    References listed on IDEAS

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    Cited by:

    1. Boadway, Robin & Song, Zhen & Tremblay, Jean-François, 2011. "The efficiency of voluntary pollution abatement when countries can commit," European Journal of Political Economy, Elsevier, vol. 27(2), pages 352-368, June.
    2. Adrian Amelung, 2016. "Das "Paris-Agreement": Durchbruch der Top-Down-Klimaschutzverhandlungen im Kreise der Vereinten Nationen," Otto-Wolff-Institut Discussion Paper Series 03/2016, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.

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    More about this item

    Keywords

    International emissions trading; Global externality; Lindahl equilibrium; Efficiency; Equity; Core; Implementability; Second-best analysis;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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