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Uncertainty and International Negotiations on Tradable Quota Treaties

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Abstract

Negotiating an international tradable quota treaty between industrialised and developing countries is complicated by uncertain marginal abatement costs and non-uniform quota prices. An initial quota allocation that implies zero expected net cost to developing countries will typically be insufficient to attract their participation in the treaty. Two options to compensate for uncertainty are discussed here, extra emissions quotas and financial transfers. The latter is found to be more effective in facilitating treaty-making, but the scope of co-operation is restricted by the developing countries' risk-aversion.

Suggested Citation

  • Morten Søberg, 1998. "Uncertainty and International Negotiations on Tradable Quota Treaties," Discussion Papers 233, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:233
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    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp233.pdf
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    Keywords

    Tradable quotas; uncertainty;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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