Limited versus Unlimited Flexibility
New Horizons in Environmental Economics series
Edited by Johan Albrecht
Chapter 7: Joint implementation as a flexible instrument – a CGE analysis between a developing and an industrialized country
7. Joint implementation as a ﬂexible instrument – a CGE analysis between a developing and an industrialized country Christoph Böhringer, Klaus Conrad and Andreas Löschel 1. INTRODUCTION Joint implementation (JI) has recently received much attention as a ﬂexible environmental policy instrument, notably in the context of the Kyoto negotiations to reduce greenhouse gas emissions. This concept was introduced during sessions of the Intergovernmental Negotiating Committee (INC) for a Framework Convention on Climate Change at the suggestion of EU member states. An international carbon trading system can be introduced in the form of JI deals to support emissions reduction in other countries where abatement is less costly. Under JI, a carbon-emitting source in a country, for example an industrialized country, can secure relaxation of any controls it may face by reducing carbon emissions in another country, for example a developing country. JI can be thought of as a carbon trading system in which the credits for carbon emission reduction are not (yet) saleable.1 If a set of countries agreed to keep their carbon emissions within certain national quota limits, the efﬁciency of environmental policy could be improved by allowing committed countries to buy emission reductions from other countries as a way of partially fulﬁlling their commitments. The principal advantages of JI are (i) promoting global cost-efﬁciency by replacing high abatement cost projects in one country by low abatement cost projects in another; hence (ii) allowing national abatement goals to be more ambitious; and (iii) improving the chances...
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