Roles of Flexible Mechanisms in International Environmental Agreements

Jeongmeen Suh and Myeonghwan Cho
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Jeongmeen Suh: Soongsil University
Myeonghwan Cho: University of Seoul

Korean Economic Review, 2017, vol. 33, 239-265

Abstract: This paper focuses on the roles of flexible mechanisms in international environmental agreements (IEAs) and investigates the possibility of IEAs to achieve globally optimal transboundary pollution reduction. We first demonstrate that emission trading does not ensure the globally optimal outcome. Then, by introducing the investing schemes (Joint Implementation and Clean Development Mechanism) together with Emissions Trading, we also show that the global optimum can be achieved under a properly designed cost-sharing rule. Moreover, there exists an initial permit allocation with which every country can be better off through the flexible mechanisms. This finding implies that the countries can reach an agreement that can help achieve the globally optimal outcome.

Keywords: International Environmental Agreement; Flexible Mechanism; Emissions Trading System; Joint Implementation; Kyoto Protocol (search for similar items in EconPapers)
JEL-codes: D62 H77 Q50 (search for similar items in EconPapers)
Date: 2017
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