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International Trade in Oil, Gas and Carbon Emission Rights: An Intertemporal General Equilibrium Model

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  • Alan S. Manne
  • Thomas F. Rutherford

Abstract

This paper employs a five-region intertemporal model to examine three issues related to carbon emission restrictions. First, we investigate the possible impact of such limits upon future oil prices. We show that carbon limits are likely to differ in their near- and long-term impact. Second, we analyze the problem of “leakage†which could arise if the OECD countries were to adopt unilateral limits upon carbon emissions. Third, we quantify some of the gains from trade in carbon emission rights. Each of these issues have been studied before, but to our knowledge this is the first study based on a multi-regional, forward-looking model. We show that sequential joint maximization can be an effective way to compute equilibria for intertemporal general equilibrium models of international trade.

Suggested Citation

  • Alan S. Manne & Thomas F. Rutherford, 1994. "International Trade in Oil, Gas and Carbon Emission Rights: An Intertemporal General Equilibrium Model," The Energy Journal, , vol. 15(1), pages 57-76, January.
    • Handle: RePEc:sae:enejou:v:15:y:1994:i:1:p:57-76
    DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No1-4
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    References listed on IDEAS

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    1. Victor Ginsburgh & Jean Waelbroeck, 1981. "Activity Analysis and General Equilibrium Modelling," ULB Institutional Repository 2013/1649, ULB -- Universite Libre de Bruxelles.
    2. John Pezzey, 1992. "Analysis of Unilateral CO2 Control in the European Community and OECD," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 159-172.
    3. Alan Manne & Richard Richels, 1992. "Buying Greenhouse Insurance: The Economic Costs of CO2 Emission Limits," MIT Press Books, The MIT Press, edition 1, volume 1, number 026213280x, December.
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    5. John Pezzey, 1992. "Analysis of Unilateral CO, Control in the European Community and OECD," The Energy Journal, , vol. 13(3), pages 159-171, July.
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    Citations

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    Cited by:

    1. Berg, Elin & Kverndokk, Snorre & Rosendahl, Knut Einar, 1998. "Gains from cartelisation in the oil market," Energy Policy, Elsevier, vol. 26(9), pages 725-727, August.
    2. Stephen P. A. Brown & Hillard G. Huntington, 1998. "Some implications of increased cooperation in world oil conservation," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q II, pages 2-9.
    3. Pang, Rui-zhi & Deng, Zhong-qi & Chiu, Yung-ho, 2015. "Pareto improvement through a reallocation of carbon emission quotas," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 419-430.
    4. Liu, Xuemei, 2008. "The monetary compensation mechanism: An alternative to the clean development mechanism," Ecological Economics, Elsevier, vol. 66(2-3), pages 289-297, June.
    5. Hodjat Ghadhimi, 2009. "Sustainable Economic Development in Energy Rich Economies: A Regional Approach," Working Papers Working Paper 2009-05, Regional Research Institute, West Virginia University, revised 21 Feb 2010.
    6. Hodjat Ghadimi, 2008. "Energy in a Resource-based Regional Economy: A Dynamic General Equilibrium Analysis," Working Papers Working Paper 2008-02, Regional Research Institute, West Virginia University.
    7. Berg, Elin & Kverndokk, Snorre & Rosendahl, Knut Einar, 2002. "Oil Exploration under Climate Treaties," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 493-516, November.
    8. Daniel J.A. Johansson & Christian Azar & Kristian Lindgren & Tobias A. Persson, 2009. "OPEC Strategies and Oil Rent in a Climate Conscious World," The Energy Journal, , vol. 30(3), pages 23-50, July.
    9. Jaccard, Mark & Montgomery, W David, 1996. "Costs of reducing greenhouse gas emissions in the USA and Canada," Energy Policy, Elsevier, vol. 24(10-11), pages 889-898.
    10. Boyd, Roy & Ibarraran, Maria E., 2002. "Costs of compliance with the Kyoto Protocol: a developing country perspective," Energy Economics, Elsevier, vol. 24(1), pages 21-39, January.
    11. repec:rri:wpaper:200802 is not listed on IDEAS
    12. Lars Lindholt, 1999. "Beyond Kyoto: CO2 permit prices and the markets for fossil fuels," Discussion Papers 258, Statistics Norway, Research Department.
    13. Stephen P. A. Brown, 1998. "Global warming policy: some economic implications," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 26-35.
    14. repec:rri:wpaper:200905 is not listed on IDEAS
    15. Kram, Tom & Hill, Douglas, 1996. "A multinational model for CO2 reduction : Defining boundaries of future CO2 emissions in nine countries," Energy Policy, Elsevier, vol. 24(1), pages 39-51, January.
    16. Springer, Urs, 2003. "International diversification of investments in climate change mitigation," Ecological Economics, Elsevier, vol. 46(1), pages 181-193, August.
    17. Fang, Guochang & Lu, Longxi & Tian, Lixin & he, Yu & Yin, Huibo, 2020. "Research on the influence mechanism of carbon trading on new energy—A case study of ESER system for China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).

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    More about this item

    Keywords

    Oil; natural gas; trade; carbon emission rights; CGE model;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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