Hot Air for Sale: A Quantitative Assessment of Russia's Near-Term Climate Policy Options

Christoph Böhringer, Ulf Moslener and Bodo Sturm

No 06-016, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Since January 1st the European Union has launched an EU-internal emissions trading scheme (EU ETS) for emission-intensive installations as the central pillar to comply with the Kyoto Protocol. The EU ETS may be linked at some time to a Kyoto emissions market where greenhouse gas emission allowances of signatory Kyoto countries can be traded. In this paper we investigate the implications of Russian market power for environmental effectiveness and regional compliance costs to the Kyoto Protocol taking into account potential linkages between the Kyoto emissions market and the EU ETS. We find that Russia may have incentives to join the EU ETS as long as the latter remains separated from the Kyoto international emissions market. In this case, Russia can exert monopolistic price discrimination between two separated markets thereby maximizing revenues from hot air sales. The EU will be able to substantially reduce compliance costs when it does not restrain itself to EU-internal emission regulation schemes. However, part of the gains from extra-EU emissions trading will come at the expense of environmental effectiveness as (more) hot air will be drawn in.

Keywords: market power; hot air; climate policy (search for similar items in EconPapers)
JEL-codes: D42 Q25 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cis, nep-ene, nep-env and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Hot air for sale: a quantitative assessment of Russia’s near-term climate policy options (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:4595

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