The Efficiency Of Voluntary Pollution Abatement When Countries Can Commit

Robin Boadway, Jean-François Tremblay and Zhen Song

No 1205, Working Paper from Economics Department, Queen's University

Abstract: In this paper, we characterize a mechanism for reducing pollution emis sions in which countries, acting non-cooperatively, commit to match each others' abatement levels and may subsequently engage in emissions quota trading. The an alysis shows that the mechanism leads to efficient outcomes. The level of emissi ons is efficient, and if the matching abatements process includes a quota tradin g stage, the marginal benefits of emissions are also equalized across countries. Given the equilibrium matching rates, the initial allocation of emission quotas (before trading) reflects each country's marginal valuation for lower pollution relative to its marginal benefit from emissions. These results hold for any number of countries, in an environment where countries have different abatement technologies and different benefits from emissions, and even if the emissions of countries are imperfect substitutes in each country's damage function. In a dynamic two-period setting, the mechanism achieves both intra-temporal and inter-temporal efficiency. We extend the model by assuming that countries are voluntarily contributing to an international public good, in addition to undertaking pollution abatements, and find that the level of emissions may be efficient even without any matching abatement commitments, and the marginal benefits of emissions may be equalized across countries even without quota trading.

Keywords: voluntary pollution abatement; matching commitments; emissions quota trading (search for similar items in EconPapers)
JEL-codes: H23 H41 H87 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2009
New Economics Papers: this item is included in nep-ene and nep-env
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/wpaper/qed_wp_1205.pdf First version 2009 (application/pdf)

Related works:
Journal Article: The efficiency of voluntary pollution abatement when countries can commit (2011)
Working Paper: The Efficiency of Voluntary Pollution Abatement when Countries can Commit (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1205

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