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The Economics of a Lost Deal

Author

Listed:
  • Ghersi, Frederic
  • Hourcade, Jean-Charles

Abstract

This paper examines compromise spaces between competing perspectives on four key climate change issues: costs, level of domestic action, environmental integrity, and developing world involvement. Based on extensive simulations of a model integration tool, SAP12 (Stochastic Assessment of Climate Policies, 12 models), the analysis considers options for fine-tuning the Kyoto Protocol, such as concrete ceilings or levies on carbon imports; restoration payments to be made on excess emissions; credits for sequestration activities in Annex B countries; and others. It shows the critical importance of the baseline against which the performance of each tool has to be assessed in the absence of direct economic penalties for noncompliance. The restoration payment option (also known as a safety valve) emerges as a superior means of addressing the core policy issues, including environmental integrity, and provides a large compromise space between payments of $35 to $100 per ton of carbon.

Suggested Citation

  • Ghersi, Frederic & Hourcade, Jean-Charles, 2001. "The Economics of a Lost Deal," Discussion Papers dp-01-48-, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-01-48-
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-01-48.pdf
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    References listed on IDEAS

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    1. Sandrine Mathy & Jean-Charles Hourcade & Christophe de Gouvello, 2001. "Clean development mechanism: leverage for development?," Climate Policy, Taylor & Francis Journals, vol. 1(2), pages 251-268, June.
    2. Lecocq, Franck & Hourcade, Jean-Charles & Ha Duong, Minh, 1998. "Decision making under uncertainty and inertia constraints: sectoral implications of the when flexibility," Energy Economics, Elsevier, vol. 20(5-6), pages 539-555, December.
    3. Minh Ha-Duong & Jean Charles Hourcade & Franck Lecocq, 1999. "Dynamic consistency problems behind the Kyoto protocol," Post-Print halshs-00002459, HAL.
    4. Minh Ha-Duong & Michael Grubb & Jean Charles Hourcade, 1997. "Influence of socioeconomic inertia and uncertainty on optimal CO2-emission abatement," Post-Print halshs-00002452, HAL.
    5. Warwick J. McKibbin & Robert Shackleton & Peter J. Wilcoxen, 1998. "The Potential Effects of International Carbon Emissions Permit Trading Under the Kyoto Protocol," Economics and Environment Network Working Papers 9805, Australian National University, Economics and Environment Network.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jean Charles Hourcade & Sandrine Mathy & P. R. Shukla, 2005. "Cutting the Climate-Development Gordian Knot - Economic options in a politically constrained world," Post-Print halshs-00006358, HAL.
    2. Lecuyer, Oskar & Quirion, Philippe, 2013. "Can uncertainty justify overlapping policy instruments to mitigate emissions?," Ecological Economics, Elsevier, vol. 93(C), pages 177-191.
    3. Jacoby, Henry D. & Ellerman, A. Denny, 2004. "The safety valve and climate policy," Energy Policy, Elsevier, vol. 32(4), pages 481-491, March.
    4. J. Hourcade & B. Perrissin Fabert & J. Rozenberg, 2012. "Venturing into uncharted financial waters: an essay on climate-friendly finance," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 12(2), pages 165-186, May.
    5. Yasuko Kameyama, 2004. "The Future Climate Regime: A Regional Comparison of Proposals," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 4(4), pages 307-326, December.
    6. Jean Charles Hourcade & Franck Lecocq, 2003. "Equitable Provision of Long-Term Public GoodsThe role of Negotiation Mandates," CIRED Working Papers halshs-00000968, HAL.
    7. Frédéric Ghersi & Jean-Charles Hourcade & Patrick Criqui, 2003. "Viable responses to the equity-responsibility dilemma: a consequentialist view," Climate Policy, Taylor & Francis Journals, vol. 3(sup1), pages 115-133, November.
    8. Khalil Helioui, 2006. "Coordination internationale des politiques climatiques : quelle efficacité ?," Working Papers hal-00866433, HAL.
    9. Jean Charles Hourcade & P.-R. Shukla & Sandrine Mathy, 2005. "Cutting the Climate-Development Gordian Knot - Economic options in a politically constrained world," Working Papers hal-00866572, HAL.
    10. Franck Lecocq & Jean-Charles Hourcade, 2012. "Unspoken ethical issues in the climate affair: Insights from a theoretical analysis of negotiation mandates," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 49(2), pages 445-471, February.
    11. VAN STEENBERGHE, Vincent, 2003. "CO2 abatement costs and permits price : Exploring the impact of banking and the role of future commitments," CORE Discussion Papers 2003098, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    12. Jean Charles Hourcade, 2002. "Dans le labyrinthe de verre. La négociation sur l'effet de serre," Post-Print halshs-00007691, HAL.
    13. Khalil Helioui, 2006. "Coordination internationale des politiques climatiques : quelle efficacité ?," CIRED Working Papers hal-00866433, HAL.
    14. Quirion, Philippe, 2010. "Complying with the Kyoto Protocol under uncertainty: Taxes or tradable permits?," Energy Policy, Elsevier, vol. 38(9), pages 5166-5173, September.
    15. Vincent Steenberghe, 2005. "Carbon dioxide abatement costs and permit price: exploring the impact of banking and the role of future commitments," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 7(2), pages 75-107, June.
    16. Oskar Lecuyer & Philippe Quirion, 2012. "Can Uncertainty Justify Overlapping Policy Instruments to Mitigate Emissions ?," Working Papers hal-00866440, HAL.

    More about this item

    Keywords

    limate negotiations; 2010 carbon markets; uncertainty about abatement costs;

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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