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The Effect of Local and Global Pollution Mandates on a Nonrenewable Resource

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

No 2010-2, Working Papers from University of Alberta, Department of Economics

Abstract: Many regions such as the European Union and states in the U.S. have introduced mandates aimed at restricting carbon emissions. On the other hand, 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. How do these multiple pollution control efforts interact when the same nonrenewable resource (e.g., coal) creates the externality? In this paper we show that environmental mandates that aim to reduce emissions and those aiming to limit the stock of pollution, may not compliment each other. For example, a stricter emissions mandate may actually increase the global pollution stock and hasten the date when the global pollution mandate becomes binding. A stricter local mandate will lead to the global mandate binding for a longer time period and a delay in the eventual transition to a clean substitute.

Keywords: dynamics; environmental regulation; externalities; resource allocation; energy markets (search for similar items in EconPapers)
JEL-codes: Q12 Q32 Q41 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2010-01-01, Revised 2010-10-01
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
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