Doda, Baran and Taschini, Luca ORCID: 0000-0001-5355-1736 (2017) Carbon dating: when is it beneficial to link ETSs? Journal of the Association of Environmental and Resource Economists, 4 (3). pp. 701-730. ISSN 2333-5955
|
Text
- Accepted Version
Download (1MB) | Preview |
Abstract
We propose a theory of the economic advantage (EA) of regulating carbon emissions by linking two emissions trading systems versus operating them under autarky. Linking implies that permits issued in one system can be traded internationally for use in the other. We show how the nature of uncertainty, market sizes, and sunk costs of linking determine EA. Even when sunk costs are small so EA>0, autarky can be preferable to one partner, depending on jurisdiction characteristics. Moreover, one partner’s permit price volatility under linking may increase without making linking the less preferred option. An empirical application calibrates jurisdiction characteristics to demonstrate the economic significance of our results which can make linking partner match crucial for the effectiveness and success of the Paris Agreement.
Item Type: | Article |
---|---|
Official URL: | http://www.journals.uchicago.edu/toc/jaere/current |
Additional Information: | © 2017 The Association of Environmental and Resource Economists |
Divisions: | Grantham Research Institute |
Subjects: | G Geography. Anthropology. Recreation > GE Environmental Sciences |
JEL classification: | H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy |
Date Deposited: | 25 Nov 2016 12:18 |
Last Modified: | 19 Sep 2024 18:09 |
Projects: | ES/K006576/1 |
Funders: | Economic and Social Research Council |
URI: | http://eprints.lse.ac.uk/id/eprint/68379 |
Actions (login required)
View Item |