Joint implementation under asymmetric information and strategic behavior

Cathrine Hagem

Environmental & Resource Economics, 1996, vol. 8, issue 4, 447 pages

Abstract: Joint Implementation (JI) under the Framework Convention on Climate Change means that countries could partly offset their national abatement commitments by investing in CO 2 abatement projects abroad. JI is introduced as a mechanism for achieving a certain global abatement target less costly by separating the commitments from the implementation of measures. This paper studies the design of a JI contract when the investor has incomplete information about the foreign firm which carries out the JI project (the host). Asymmetric information leads to a decrease in the potential cost savings from JI. Furthermore, private information held by the potential host firm could give the firm a significant positive utility of participating in JI projects. The possibility of being a host for a JI project in the future can prevent potential host firms from investing in profitable abatement projects today. The paper analyzes the impact on emissions of CO 2 of strategic behavior among potential hosts for JI projects. Copyright Kluwer Academic Publishers 1996

Keywords: joint implementation; climate policy; incentive contracts; asymmetric information (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (24)

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DOI: 10.1007/BF00357412

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