Valuing Equally the Environmental Goods in Rich and Poor Countries in a Post-Kyoto World

Dritan Osmani

Czech Economic Review, 2013, vol. 7, issue 2, 073-099

Abstract: The optimal pollution abatement levels are found by maximizing global social welfare in a permits trade system under the constraint that environmental goods are evaluated equally in rich and poor countries. Evaluating equally environmental goods in poor and rich countries makes possible to build a relation between the income elasticity of marginal utility e and the inequality aversion parameter gamma (Fankhauser et al. 1997; Johansson-Stenman 2000), which narrows the variation of e for a particular value of gamma. As a result, smaller variation for optimal abatement levels is obtained, which allows to inspect what Post-Kyoto abatement levels for poor and rich countries respect the requirement of evaluating equally the environmental goods in rich and poor countries. One finding is that in a Post-Kyoto world, the optimal abatement levels of poor countries are always different from zero, if we aim to evaluate equally the environmental goods in poor and rich countries. Furthermore, in a permits trade sy stem, if we increase abatement levels continually, it can happen that poor countries have to carry out higher emission reductions than rich ones.

Keywords: Cost-benefit analysis; distributional weights; global warming; welfare theory; integrated assessment modeling (search for similar items in EconPapers)
JEL-codes: D61 D62 D63 (search for similar items in EconPapers)
Date: 2013
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