Controlling Global Warming

Controlling Global Warming

Perspectives from Economics, Game Theory and Public Choice

New Horizons in Environmental Economics series

Edited by Christoph Böhringer, Michael Finus and Carsten Vogt

In this exhaustive study, the authors break new ground by integrating cutting edge insights on global warming from three different perspectives: game theory, cost-effectiveness analysis and public choice. For each perspective the authors provide an overview of important results, discuss the theoretical consistency of the models and assumptions, highlight the practical problems which are not yet captured by theory and explore the different applications to the various problems encountered in global warming. They demonstrate how each perspective has its own merits and weaknesses, and advocate an integrated approach as the best way forward. They also propose a research agenda for the future which encompasses the three methods to create a powerful tool for the analysis and resolution of global pollution problems.

Chapter 6: Interest group preference for an international emissions trading scheme

Jan-Tjeerd Boom

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

Extract

6. Interest group preference for an international emissions trading scheme Jan-Tj eerd Boom 1. INTRODUCTION The Kyoto Protocol of 1996 allows emissions trading between the countries that have committed to an emission ceiling (the Annex B countries). However, it does not specify how international emissions trading should be conducted. Basically, there are three possible schemes of international emissions trading: government trading, permit trading and credit trading. The description of emissions trading in the Kyoto Protocol clearly refers to trade between governments, although private trading has not been dismissed. In the case of government trading, trading can be seen as a bilateral renegotiation of the abatement commitments of the trading countries. After the trade is concluded, the countries involved will have to change their domestic policies to comply with their new commitment. Permit trading and credit trading are both private trading schemes, This means that under both schemes, individual emission sources will be able to trade directly with each other. Permit trading means that emissions sources are regulated through a system of tradable permits at the national level. International permit trading can then be conducted by linking the national trading schemes. With credit trading, the sources are regulated through some other instrument, most likely a relative standard, and are allowed to trade credits which are obtained through abatement projects. Several studies have analyzed the advantages and disadvantages of the three international emissions trading systems. Bohm (1999) gives an analysis of a government trading system and concludes that it can, under certain...

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