Trade of Permits for Greenhouse Gas Emissions; Bilateral Trade Need not Be the Answer

Roberto Burguet and Jaume Sempere

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: The Kyoto Protocol sets national quotas on CO2 emissions and allows international trade of these quotas. We argue that this trade is characterized by asymmetric, identity-dependent externalities, and show that bilateral trade may not be sufficient for an efficient allocation of emissions. We derive conditions under which bilateral trade does improve the allocation of permits. The conditions are strong. In this sense, we argue that, for emissions permits, market design matters.

Keywords: Terms of trade; asymmetric externalities; permits trade (search for similar items in EconPapers)
JEL-codes: D62 F18 (search for similar items in EconPapers)
Pages: 24
Date: 2007-05-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Trade of Permits for Greenhouse Gas Emissions: Bilateral Trade Need not be the Answer (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:746.08

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