Sectoral and Regional Expansion of Emissions Trading

Christoph Böhringer, Bouwe Dijkstra and Knut Einar Rosendahl

No V-337-11, Working Papers from University of Oldenburg, Department of Economics

Abstract: We consider an international emissions trading scheme with partial sectoral and regional coverage. Sectoral and regional expansion of the trading scheme is beneficial in aggregate, but not necessarily for individual countries. We simulate international CO2 emission quota markets using marginal abatement cost functions and the Copenhagen 2020 climate policy targets for selected countries that strategically allocate emissions in a bid to manipulate the quota price. Quota exporters and importers generally have conflicting interests about admitting more countries to the trading coalition, and our results indicate that some countries may lose substantially when the coalition expands in terms of new countries. For a given coalition, expanding sectoral coverage makes most countries better off, but some countries (notably the USA and Russia) may lose out due to loss of strategic advantages. In general, exporters tend to have stronger strategic power than importers.

Keywords: Emissions Trading; Allocation of Quotas; Strategic Behavior (search for similar items in EconPapers)
JEL-codes: C61 C72 Q25 (search for similar items in EconPapers)
Date: 2011-06, Revised 2011-06
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Citations: View citations in EconPapers (1)

Published in Oldenburg Working Papers V-337-11

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Related works:
Journal Article: Sectoral and regional expansion of emissions trading (2014)
Working Paper: Sectoral and regional expansion of emissions trading (2011)
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