Is International Emissions Trading Always Beneficial?

Mustafa Babiker, John Reilly and Laurent Viguier

The Energy Journal, 2004, vol. 25, issue 2, 33-56

Abstract: Economic efficiency is a major argument for international emissions trading under the Kyoto Protocol. We show that permit trading can be welfare decreasing for countries, even though private trading parties benefit. The result is a case of “immiserizing†growth in the sense of Bhagwati where the negative terms of trade and tax interaction effects wipe out the gains from trading. Simulation and welfare decomposition results based on a CGE model of the global economy show that under EU-wide trading countries that are net permit sellers generally lose, due primarily to the existence of distortionary energy taxes.

Keywords: Emissions trading; Kyoto Protocol; CGE model; EU; EPPA-EU model (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:25:y:2004:i:2:p:33-56

DOI: 10.5547/ISSN0195-6574-EJ-Vol25-No2-2

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