International Negotiations for Reducing Greenhouse Gases with Emission Permits Trading

Koichi Tadenuma, 宏一 蓼沼 and コウイチ タデヌマ

No 191, Discussion Paper from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: We build a three-stage game model of international negotiations on regulation of global emissions of greenhouse gases, and examine the Pareto optimality of an equilibrium allocation. First, we derive the condition for Pareto optimal allocations, which is an extension of the celebrated Samuelson condition. Next, we show that although production efficiency of a final allocation is always met at an equilibrium of the game, overall Pareto optimality may not be satisfied. This is because in negotiations on the level of global emissions in the first stage of the game, countries make expectations on the effect of the total supply of emission permits on the revenue from or the expenditure for emission permits in a later stage.

Pages: 20 pages
Date: 2004-01
Note: 37956
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Persistent link: https://EconPapers.repec.org/RePEc:hit:piedp1:191

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