The Kyoto Protocol, market power, and enforcement

Alan de Brauw

Applied Economics, 2006, vol. 38, issue 18, 2169-2178

Abstract: The Kyoto Protocol aims to limit aggregate carbon emissions by participating countries to 1990 emissions levels in aggregate. It also allows for the creation of a permit market in which countries will be able to buy and sell the right to emit carbon dioxide. This paper investigates how market power, held by the countries of the former Soviet Union, and enforcement of the carbon emission limits might affect the abatement and the cost of compliance with the Kyoto Protocol. To do so, it uses a modified version of the van Egteren-Weber (1996) model to investigate a permit market in the presence of both market power and enforcement difficulties. It then simulates the model, finding that if meeting abatement targets is the goal, regulating the supply side of the market and convex fine schedules are the most effective tools.

Date: 2006
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DOI: 10.1080/00036840600895442

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