How to Boost Countries’ Climate Ambitions: Turning Gains from Emissions Trading into Gains for Climate

Christoph Böhringer, Carsten Helm and Laura Schürer

No 10624, CESifo Working Paper Series from CESifo

Abstract: The Nationally Determined Contributions (NDCs) under the Paris Agreement fall short of the abatement needed to reach the 2°C target. Emissions trading could be a “costless” means to reduce the ambition gap if countries used their gains from trade for additional abatement. However, this requires cooperative behavior. We show that with emissions trading, countries’ non-cooperative choices of emissions reduction contributions can lead to even more abatement, provided that these contributions may not be lower than initial NDCs. Intuitively, countries with high climate damages raise their contributions if they can meet them partly through abatement in countries with low abatement costs.

Keywords: Paris Agreement; emissions trading; NDCs; game theory (search for similar items in EconPapers)
JEL-codes: C72 H23 Q54 Q56 Q58 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-cdm, nep-ene, nep-env and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10624

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