Trading hot-air: the influence of permit allocation rules, market power and the US withdrawal from the Kyoto Protocol

Gernot Klepper and Sonja Peterson ()

Open Access Publications from Kiel Institute for the World Economy from Kiel Institute for the World Economy (IfW Kiel)

Abstract: After the conferences in Bonn and Marrakech it is likely that international emissions trading will be realized in the near future. Major influences on the permit market are the institutional detail, the participation structure and the treatment of hot-air. Different scenarios do not only differ in their implications for the demand and supply of permits and thus the permit price, but also in their allocative effects. In this paper we discuss likely institutional designs for permit allocation in the hot-air economies and the use of market power and quantify the resulting effects by using the computable general equilibrium model DART. It turns out that the amount of hot-air supplied will be small if hot-air economies cooperate in their decisions. Under welfare maximization more hot-air is supplied than in the case were governments try to maximize revenues from permit sales.

Keywords: CGE Model; DART; Emission Trading; Hot-Air; Kyoto Protocol; Market Power; Permit Allocation (search for similar items in EconPapers)
JEL-codes: C68 D58 F18 Q48 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (14)

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Journal Article: Trading Hot-Air. The Influence of Permit Allocation Rules, Market Power and the US Withdrawal from the Kyoto Protocol (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkie:3718

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