Perspectives from Economics, Game Theory and Public Choice
New Horizons in Environmental Economics series
Edited by Christoph Böhringer, Michael Finus and Carsten Vogt
Chapter 6: Interest group preference for an international emissions trading scheme
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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