Strategic Delegation and International Permit Markets: Why Linking May Fail

Wolfgang Habla and Ralph Winkler

No 6515, CESifo Working Paper Series from CESifo

Abstract: We analyse a principal-agent relationship in the context of international climate policy. Principals in two countries first decide whether to merge domestic emission permit markets to an international market, then delegate the domestic permit supply to an agent. We find that principals select agents caring less for environmental damages than they do themselves in case of an international market regime, while they opt for self-representation in case of domestic markets. This strategic delegation incentive renders the linking of permit markets less attractive and constitutes a novel explanation for the reluctance to establish non-cooperative international permit markets.

Keywords: non-cooperative climate policy; political economy; emissions trading; linking of permit markets; strategic delegation; strategic voting (search for similar items in EconPapers)
JEL-codes: D72 H23 H41 Q54 Q58 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-agr, nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Strategic delegation and international permit markets: Why linking May fail (2018)
Working Paper: Strategic delegation and international permit markets: Why linking may fail (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6515

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