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Linking Permit Markets Multilaterally

Baran Doda (), Simon Quemin and Luca Taschini
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Baran Doda: LSE

No 2019.17, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: We formally study the determinants, magnitude and distribution of efficiency gains generated in multilateral linkages between permit markets. We provide two novel decomposition results for these gains, characterize individual preferences over linking groups and show that our results are largely unaltered with strategic domestic emissions cap selection or when banking and borrowing are allowed. Using the Paris Agreement pledges and power sector emissions data of five countries which all use or considered using both emissions trading and linking, we quantify the efficiency gains. We find that the computed gains can be sizable and are split roughly equally between effort and risk sharing.

Keywords: Climate change policy; International emissions trading systems; Multilateral linking; Effort sharing; Risk sharing (search for similar items in EconPapers)
JEL-codes: Q58 H23 F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env, nep-ore and nep-reg
Date: 2019-09
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Forthcoming in Journal of Environmental Economics and Management

Downloads: (external link) First version, 2019 (application/pdf)

Related works:
Working Paper: Linking permit markets multilaterally (2019) Downloads
Working Paper: Linking Permit Markets Multilaterally (2018) Downloads
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