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Clubs, Ceilings and CDM: Macroeconomics of Compliance with the Kyoto Protocol

Johannes Bollen, Arjen Gielen, and Hans Timmer

Year: 1999
Volume: Volume 20
Number: Special Issue - The Cost of the Kyoto Protocol: A Multi-Model Evaluation
DOI: 10.5547/ISSN0195-6574-EJ-Vol20-NoSI-8
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Abstract:
The Kyoto Protocol suggests that imposing restrictions on emission trade among Annex I countries may force domestic action in each country. The Protocol also mentions the Clean Development Mechanism (CDM) as On instrument to extend trade to countries outside Annex I. We analyze both restrictions on and extensions of permit trade among Annex I countries. We use the applied general equilibrium model WorldScan in this analysis. We show that, compared to unrestricted trade, the USA tends to gain from restrictions on emission trade while other OECD countries are likely to be harmed. We further show that restrictions probably do not prevent so-called hot air in the former Soviet Union from being used. On the contrary, restrictions tend to increase global emissions. Finally, we conclude that CDM can be an efficient option to reduce abatement costs, but certain conditions should be fulfilled to avoid severe carbon leakage.





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