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Sectoral and regional expansion of emissions trading

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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.

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  • Christoph Böhringer & Bouwe Dijkstra & Knut Einar Rosendahl, 2011. "Sectoral and regional expansion of emissions trading," Discussion Papers 654, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:654
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    Cited by:

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    4. 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, Open Access Journal, vol. 9(11), pages 1-17, November.
    5. Lassi Ahlvik & Matti Liski, 2019. "Think global, act local! A mechanism for global commons and mobile firms," CESifo Working Paper Series 7597, CESifo.
    6. 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).
    7. 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).
    8. 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.
    9. Vicki Duscha & Everett B. Peterson & Joachim Schleich & Katja Schumacher, 2019. "Sectoral Targets To Address Competitiveness — A Cge Analysis With Focus On The Global Steel Sector," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 1-27, February.
    10. Costantini, Valeria & D'Amato, Alessio & Martini, Chiara & Tommasino, Maria Cristina & Valentini, Edilio & Zoli, Mariangela, 2013. "Taxing international emissions trading," Energy Economics, Elsevier, vol. 40(C), pages 609-621.
    11. Christoph Boehringer & Carolyn Fischer, 2020. "Kill Bill or Tax: An Analysis of Alternative CO2 Price Floor Optionsfor EU Member States," Working Papers V-432-20, University of Oldenburg, Department of Economics, revised Oct 2020.
    12. 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.
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    15. 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, Open Access Journal, vol. 10(3), pages 1-26, February.

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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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