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Think Globally, Act Locally? Stock vs Flow Regulation of a Fossil Fuel

Jean-Pierre Amigues (), Ujjayant Chakravorty () and Michel Moreaux

No 584, IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse

Abstract: Regulation of environmental externalities like global warming from the burning of fossil fuels (e.g., coal and oil) is often done by capping both emission flows and stocks. For example, the European Union and states in the Northeastern United States have introduced caps on flows of carbon emissions while the stated goal of the Intergovernmental Panel on Climate Change (IPCC) which provides the science behind the current global climate negotiations is to stabilize the atmospheric stock of carbon. Flow regulation is often local or regional in nature, while stock regulation is global. How do these multiple pollution control efforts interact when a nonrenewable resource creates pollution? In this paper we show that local and global pollution control efforts, if uncoordinated, may exacerbate environmental externalities. For example, a stricter cap on emission flows may actually increase the global pollution stock and hasten the date when the global pollution cap is reached.

JEL-codes: Q12 Q32 Q41 (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-ene and nep-env
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Working Paper: Think Globally, Act Locally? Stock vs Flow Regulation of a Fossil Fuel (2009) Downloads
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