Swap Bonds or Stocks, or Balance Trade! A Game of Implicit Environmental Policy

Hagen Schwerin

No 18/293, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: This paper develops a mechanism to correct production externalities between several parties, such as externalities motivating environmental policy between countries, using asset ownership. Efficiency can be obtained if each party retains less than the full share of their own gain from resource use materialized in gross product. The remainder of the product can be earned by other parties - in a reciprocal way. The resulting swaps can be enforced by using bonds or stocks or with balanced trade of shares, hindering free-riding. The best international climate policy thus may be swap contracts.

Keywords: Free-rider behavior; Privately provided public good; Lindahl prices; Property rights; Climate agreement; General equilibrium. (search for similar items in EconPapers)
JEL-codes: D62 H23 Q58 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2018-07
New Economics Papers: this item is included in nep-ene and nep-env
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