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Emissions Trading, Capital Flows and the Kyoto Protocol

Warwick J. McKibbin, Martin T. Ross, Robert Shackleton and Peter J. Wilcoxen

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-12
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Abstract:
We use an econometrically estimated multi-region, multi-sector general equilibrium model of the world economy to examine the effects of the tradable emissions permit system proposed in the 1997 Kyoto Protocol, under various assumptions about the extent of international permit trading. We focus, in particular, on the effects of the system on international trade and capital flows. Our results suggest that consideration of these flows significantly affects estimates of the domestic effects of the emissions mitigation policy, compared with analyses that ignore international capital flows.



The Efficiency and Robustness of Allowance Banking in the U.S. Acid Rain Program

A. Denny Ellerman and Juan-Pablo Montero

Year: 2007
Volume: Volume 28
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No4-3
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Abstract:
This paper provides an empirical evaluation of the efficiency of allowance banking in the nationwide market for sulfur dioxide (SO2) emission allowances that was created by the U.S. Acid Rain Program. We develop a model of efficient banking, select appropriate parameter values, and evaluate the efficiency of observed temporal pattern of abatement based on aggregate data from the first eight years of the Acid Rain Program. Contrary to the general opinion that banking in this program has been excessive, we find that it has been reasonably efficient. We also identify the erroneous assumptions underlying the earlier view and the conditions required for efficient banking to exist independently of changes in the counterfactual, an attribute we call robustness. These results show that firms use banking provisions in a rational and predictable way and that, at least in the US Acid Rain Program, there is no support for the often expressed concern that banked permits will be used all at once to create emissions spikes.





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