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Emission trading beyond Europe: linking schemes in a post-Kyoto world

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  • Anger, Niels

Abstract

This paper assesses the economic impacts of linking the EU Emission Trading Scheme (ETS) to emerging schemes beyond Europe, in the presence of a post-Kyoto agreement in 2020. Simulations with a numerical multi-country model of the world carbon market show that linking the European ETS induces only marginal economic benefits: As trading is restricted to energy-intensive industries that are assigned generous initial emissions, the major compliance burden is carried by non-trading industries excluded from the linked ETS. In the presence of parallel government trading under a post-Kyoto Protocol, excluded sectors can however be substantially compensated by international trading at the country level, thus increasing the political attractiveness of the linking process. From an efficiency perspective, a desirable future climate policy regime represents a joint trading system that enables international emission trading between ETS companies and governments. While the Clean Development Mechanism (CDM) cannot alleviate the inefficiencies of linked ETS, in a parallel or joint trading regime the access to abatement options of developing countries induces large additional cost savings. Restricting CDM access via a supplementarity criterion does not significantly decrease the economic benefits from project-based emission crediting.

Suggested Citation

  • Anger, Niels, 2006. "Emission trading beyond Europe: linking schemes in a post-Kyoto world," ZEW Discussion Papers 06-058, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:5452
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    File URL: https://www.econstor.eu/bitstream/10419/24513/1/dp06058.pdf
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    References listed on IDEAS

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    1. Christoph Böhringer & Ulf Moslener & Bodo Sturm, 2007. "Hot air for sale: a quantitative assessment of Russia’s near-term climate policy options," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(4), pages 545-572, December.
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    Cited by:

    1. Ralf Schüle & Wolfgang Sterk, 2009. "Linking domestic emissions trading schemes and the evolution of the international climate regime bottom-up support of top-down processes? Introduction to the special issue of MITI," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(5), pages 375-378, June.
    2. Stankeviciute, Loreta & Kitous, Alban & Criqui, Patrick, 2008. "The fundamentals of the future international emissions trading system," Energy Policy, Elsevier, vol. 36(11), pages 4272-4286, November.
    3. V. Oikonomou & C. Jepma, 2008. "A framework on interactions of climate and energy policy instruments," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 13(2), pages 131-156, February.
    4. Benz, Eva & Trück, Stefan, 2009. "Modeling the price dynamics of CO2 emission allowances," Energy Economics, Elsevier, vol. 31(1), pages 4-15, January.
    5. repec:gam:jsusta:v:10:y:2018:i:2:p:481-:d:131407 is not listed on IDEAS

    More about this item

    Keywords

    EU ETS; Emission Trading; Kyoto Protocol; Clean Development Mechanism;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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