In this note we extend the analysis developed by Helm (2003) and consider an international emissions trading system (ETS) where the initial allocation of tradeable permits may be chosen non cooperatively, as in Helm, or cooperatively. We first derive conditions guaranteeing that polluting firms located in a given country benefit from an increase in the received amount of emission permits; then, we compare the countries' allocation choices under both a non-cooperative (decentralized) and a cooperative (centralized) regime, showing that, both in each country and on aggregate, decentralization leads to a lower environmental quality than the "first best" that would arise under a centralized ETS. As a result, the equilibrium permits price in the latter case is higher than under decentralization. We show that this conclusions do not depend only on the presence of transboundary pollution, but also on the international dimension of emissions trading. Finally, although centralization leads to higher welfare and better environmental quality, we find that some countries might not consent to it and, moreover, we identify cases where consensus on centralization cannot be recovered by simply redistributing permits among countries.

D'Amato, A., Valentini, E. (2011). A note on international emissions trading with endogenous allowance choices. ECONOMICS BULLETIN, 31(2), 1451-1462.

A note on international emissions trading with endogenous allowance choices

D'AMATO, ALESSIO;
2011-01-01

Abstract

In this note we extend the analysis developed by Helm (2003) and consider an international emissions trading system (ETS) where the initial allocation of tradeable permits may be chosen non cooperatively, as in Helm, or cooperatively. We first derive conditions guaranteeing that polluting firms located in a given country benefit from an increase in the received amount of emission permits; then, we compare the countries' allocation choices under both a non-cooperative (decentralized) and a cooperative (centralized) regime, showing that, both in each country and on aggregate, decentralization leads to a lower environmental quality than the "first best" that would arise under a centralized ETS. As a result, the equilibrium permits price in the latter case is higher than under decentralization. We show that this conclusions do not depend only on the presence of transboundary pollution, but also on the international dimension of emissions trading. Finally, although centralization leads to higher welfare and better environmental quality, we find that some countries might not consent to it and, moreover, we identify cases where consensus on centralization cannot be recovered by simply redistributing permits among countries.
2011
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-P/02 - POLITICA ECONOMICA
Settore SECS-P/03 - SCIENZA DELLE FINANZE
English
Senza Impact Factor ISI
emissions trading, environmental federalism, permits allocation
D'Amato, A., Valentini, E. (2011). A note on international emissions trading with endogenous allowance choices. ECONOMICS BULLETIN, 31(2), 1451-1462.
D'Amato, A; Valentini, E
Articolo su rivista
File in questo prodotto:
File Dimensione Formato  
11_DAmato_Valentini_EB.pdf

solo utenti autorizzati

Descrizione: Articolo
Licenza: Copyright dell'editore
Dimensione 162.95 kB
Formato Adobe PDF
162.95 kB Adobe PDF   Visualizza/Apri   Richiedi una copia

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/99769
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 3
  • ???jsp.display-item.citation.isi??? ND
social impact