Instruments for Climate Policy

Instruments for Climate Policy

Limited versus Unlimited Flexibility

New Horizons in Environmental Economics series

Edited by Johan Albrecht

Instruments for Climate Policy focuses on economic and political aspects related to the recent proposals and the debate on limits in flexibility, and discusses EU and US perspectives on climate policy instruments and strategies. This is followed by chapters on economic efficiency and the use of flexible instruments as well as contributions to the debate on ‘when flexibility’, on the arguments behind the EU ceilings proposal and on voluntary approaches to climate policy. One of the main conclusions reached with respect to proposals for limiting flexibility is the need to evaluate simultaneously their economic, ecological and international political consequences. The authors include both important policymakers and leading academics in the area.

Chapter 7: Joint implementation as a flexible instrument – a CGE analysis between a developing and an industrialized country

Christoph Böhringer, Klaus Conrad and Andreas Löschel

Subjects: economics and finance, environmental economics, environment, climate change, environmental economics


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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