A Lindahl Solution to International Emissions Trading

Yukihiro Nishimura ()
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Yukihiro Nishimura: Yokohama National University and Queen's University

No 1177, Working Papers from Queen's University, Department of Economics

Abstract: We consider international negotiations on the level of global pollution, and examine the Lindahl solution which determines the distribution of the pollution permits with unanimous agreement. We show various properties to clarify difficulties to achieve a Pareto efficient allocation as an agreement. The Lindahl solution may result in an unfair allocation, and it does not belong to the $\gamma$-core as in other solutions based on emissions trading. On the other hand, we provide mechanisms that implement the Lindahl solution as the subgame-perfect equilibrium. We also consider the market with region-specific prices as a device to induce second-best Pareto efficient allocations.

Keywords: International emissions trading; Global externality; Lindahl equilibrium; Efficiency; Equity; Core; Implementability; Second-best analysis (search for similar items in EconPapers)
JEL-codes: Q54 D61 D62 D63 D78 H87 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-env
Date: 2008-08
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Persistent link: http://EconPapers.repec.org/RePEc:qed:wpaper:1177

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