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Does Distribution Matter? When Flexibility and Pareto-Efficiency in Greenhouse Gas Abatement

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  • Gunter Stephan
  • Georg Müller-Fürstenberger

Abstract

This paper analyses banking and borrowing of carbon emission rights within the framework of a simple, integrated assessment model. Breaking the world economy in just two regions it will be shown: (1) Increasing when-flexibility in greenhouse gas abatement through banking and borrowing of carbon emission permits has a positive effect on welfare for regions with a poor endowment in carbon emission rights, but negatively affects rich-endowed regions. (2) Intergenerational fairness advocates intertemporal flexibility in greenhouse gas abatement, irrespectively of the initial allocation of carbon right. (3) Changing the degree of when-flexibility has only a small impact on global climate damages. (4) This is in contrast to the observation that the initial allocation of carbon emission rights has a significant impact on atmospheric carbon.

Suggested Citation

  • Gunter Stephan & Georg Müller-Fürstenberger, 2001. "Does Distribution Matter? When Flexibility and Pareto-Efficiency in Greenhouse Gas Abatement," Diskussionsschriften dp0102, Universitaet Bern, Departement Volkswirtschaft.
  • Handle: RePEc:ube:dpvwib:dp0102
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    References listed on IDEAS

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    More about this item

    Keywords

    Carbon rights; climate policy; integrated assessment; banking and trade;

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • F2 - International Economics - - International Factor Movements and International Business

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