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The Economic and Environmental Implications of the US Repudiation of the Kyoto Protocol and the Subsequent Deals in Bonn and Marrakech

  • Zhang, ZhongXiang
  • Löschel, Andreas

Taking account of sinks credits as agreed in Bonn and Marrakech, this paper illustrates how market power could be exerted in the absence of the US ratification under Annex 1 trading and explores the potential implications of non-competitive supply behavior for the international market of tradable permits, compliance costs for the remaining Annex 1 countries to meet their revised Kyoto targets, and the environmental effectiveness. Our results show that the US withdrawal from the Kyoto Protocol has great impact on the economic costs and environmental effectiveness of the Protocol since it would lead to no real emission reduction in all remaining Annex 1 regions. Depending on how market power is exerted by the dominant permit suppliers, the former Soviet Union and the Eastern European countries, the overall compliance costs of all remaining Annex 1 regions differ significantly. Moreover, curtailing permit supply by market power increases substantially the overall environmental effectiveness by cutting the amount of hot air being emitted into the atmosphere by more than half, although to much less extent than in the case of the US compliance.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-28.

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Date of creation: 2002
Date of revision:
Handle: RePEc:zbw:zewdip:869
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  1. Eftichios Sartzetakis, 1997. "Tradeable emission permits regulations in the presence of imperfectly competitive product markets: Welfare implications," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(1), pages 65-81, January.
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  8. Hahn, Robert W., 1982. "Market Power and Transferable Property Rights," Working Papers 402, California Institute of Technology, Division of the Humanities and Social Sciences.
  9. ZhongXiang Zhang, 2000. "The design and implementation of an international trading scheme for greenhouse gas emissions," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 18(3), pages 321-337, June.
  10. Zhang, ZhongXiang, 1998. "Greenhouse gas emissions trading and the world trading system," MPRA Paper 12971, University Library of Munich, Germany.
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  12. Johannes Bollen & Arjen Gielen & Hans Timmer, 1999. "Clubs, Ceilings and CDM: Macroeconomics of Compliance with the Kyoto Protocol," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 177-206.
  13. Paul M. Bernstein & W. David Montgomery & Thomas F. Rutherford & Gui-Fang Yang, 1999. "Effects of Restrictions on International Permit Trading: The MS-MRT Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 221-256.
  14. Criqui, Patrick & Mima, Silvana & Viguier, Laurent, 1999. "Marginal abatement costs of CO2 emission reductions, geographical flexibility and concrete ceilings: an assessment using the POLES model," Energy Policy, Elsevier, vol. 27(10), pages 585-601, October.
  15. Böhringer, Christoph & Löschel, Andreas, 2001. "Market power in international emissions trading : the impact of U.S. withdrawal from the Kyoto Protocol," ZEW Discussion Papers 01-58, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  16. Misiolek, Walter S. & Elder, Harold W., 1989. "Exclusionary manipulation of markets for pollution rights," Journal of Environmental Economics and Management, Elsevier, vol. 16(2), pages 156-166, March.
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