IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_10624.html
   My bibliography  Save this paper

How to Boost Countries’ Climate Ambitions: Turning Gains from Emissions Trading into Gains for Climate

Author

Listed:
  • Christoph Böhringer
  • Carsten Helm
  • Laura Schürer

Abstract

The Nationally Determined Contributions (NDCs) under the Paris Agreement fall short of the abatement needed to reach the 2°C target. Emissions trading could be a “costless” means to reduce the ambition gap if countries used their gains from trade for additional abatement. However, this requires cooperative behavior. We show that with emissions trading, countries’ non-cooperative choices of emissions reduction contributions can lead to even more abatement, provided that these contributions may not be lower than initial NDCs. Intuitively, countries with high climate damages raise their contributions if they can meet them partly through abatement in countries with low abatement costs.

Suggested Citation

  • Christoph Böhringer & Carsten Helm & Laura Schürer, 2023. "How to Boost Countries’ Climate Ambitions: Turning Gains from Emissions Trading into Gains for Climate," CESifo Working Paper Series 10624, CESifo.
    • Handle: RePEc:ces:ceswps:_10624
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp10624.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. O. Bahn & A. Haurie, 2008. "A Class Of Games With Coupled Constraints To Model International Ghg Emission Agreements," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 10(04), pages 337-362.
    2. Bård Harstad, 2023. "Pledge-and-Review Bargaining: from Kyoto to Paris," The Economic Journal, Royal Economic Society, vol. 133(651), pages 1181-1216.
    3. Hoel, Michael, 1991. "Global environmental problems: The effects of unilateral actions taken by one country," Journal of Environmental Economics and Management, Elsevier, vol. 20(1), pages 55-70, January.
    4. Michael Finus & Ekko Ierland & Rob Dellink, 2006. "Stability of Climate Coalitions in a Cartel Formation Game," Economics of Governance, Springer, vol. 7(3), pages 271-291, August.
    5. Scott Barrett & Astrid Dannenberg, 2016. "An experimental investigation into ‘pledge and review’ in climate negotiations," Climatic Change, Springer, vol. 138(1), pages 339-351, September.
    6. Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Journal of Public Economics, Elsevier, vol. 87(12), pages 2737-2747, December.
    7. Harstad, Bård, 2023. "Pledge-and-review bargaining," Journal of Economic Theory, Elsevier, vol. 207(C).
    8. Jennifer Jacquet & Dale Jamieson, 2016. "Soft but significant power in the Paris Agreement," Nature Climate Change, Nature, vol. 6(7), pages 643-646, July.
    9. Mikhail Golosov & John Hassler & Per Krusell & Aleh Tsyvinski, 2014. "Optimal Taxes on Fossil Fuel in General Equilibrium," Econometrica, Econometric Society, vol. 82(1), pages 41-88, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Holtsmark, Katinka & Midttømme, Kristoffer, 2021. "The dynamics of linking permit markets," Journal of Public Economics, Elsevier, vol. 198(C).
    2. Birgit Bednar-Friedl, 2012. "Climate policy targets in emerging and industrialized economies: the influence of technological differences, environmental preferences and propensity to save," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 39(2), pages 191-215, May.
    3. Habla, Wolfgang & Winkler, Ralph, 2018. "Strategic delegation and international permit markets: Why linking May fail," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 244-250.
    4. Arvaniti, Maria & Habla, Wolfgang, 2021. "The political economy of negotiating international carbon markets," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    5. Kai A. Konrad & Marcel Thum, 2018. "Does a Clean Development Mechanism Facilitate International Environmental Agreements?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(4), pages 837-851, April.
    6. Henry Tulkens, 2016. "COP 21 and Economic Theory: Taking Stock," Revue d'économie politique, Dalloz, vol. 126(4), pages 471-486.
    7. Buchholz, Wolfgang & Hattori, Keisuke, 2024. "A paradox of coalition building in public good provision," Economic Modelling, Elsevier, vol. 135(C).
    8. Helm, Carsten & Wirl, Franz, 2014. "The principal–agent model with multilateral externalities: An application to climate agreements," Journal of Environmental Economics and Management, Elsevier, vol. 67(2), pages 141-154.
    9. Snorre Kverndokk, 2013. "Moral positions on tradable permit markets," Chapters, in: Roger Fouquet (ed.), Handbook on Energy and Climate Change, chapter 22, pages 490-499, Edward Elgar Publishing.
    10. Carsten Helm & Franz Wirl, 2011. "International Environmental Agreements: Incentive Contracts with Multilateral Externalities," Working Papers V-336-11, University of Oldenburg, Department of Economics, revised Jun 2011.
    11. Fabio Sferra & Massimo Tavoni, 2013. "Endogenous Participation in a Partial Climate Agreement with Open Entry: A Numerical Assessment," Working Papers 2013.60, Fondazione Eni Enrico Mattei.
    12. Carsten Helm & Franz Wirl, 2016. "Climate Policies with Private Information: The Case for Unilateral Action," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(4), pages 893-916.
    13. Goeschl, Timo & Soldà, Alice, 2024. "(Un)Trustworthy pledges and cooperation in social dilemmas," Journal of Economic Behavior & Organization, Elsevier, vol. 223(C), pages 106-119.
    14. Eyckmans, Johan & Kverndokk, Snorre, 2010. "Moral concerns on tradable pollution permits in international environmental agreements," Ecological Economics, Elsevier, vol. 69(9), pages 1814-1823, July.
    15. MacKenzie, Ian A., 2011. "Tradable permit allocations and sequential choice," Resource and Energy Economics, Elsevier, vol. 33(1), pages 268-278, January.
    16. Tulkens, Henry, 2016. "COP 21 and Economic Theory: Taking Stock," ET: Economic Theory 236237, Fondazione Eni Enrico Mattei (FEEM).
    17. repec:old:wpaper:336-11 is not listed on IDEAS
    18. Köke, Sonja & Lange, Andreas, 2013. "Negotiating Environmental Agreements under Ratification Uncertainty," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79952, Verein für Socialpolitik / German Economic Association.
    19. Dijkstra, Bouwe R. & Nentjes, Andries, 2020. "Pareto-Efficient Solutions for Shared Public Good Provision: Nash Bargaining versus Exchange-Matching-Lindahl," Resource and Energy Economics, Elsevier, vol. 61(C).
    20. Mads Greaker & Cathrine Hagem, 2010. "Strategic investment in climate friendly technologies: the impact of permit trade," Discussion Papers 615, Statistics Norway, Research Department.
    21. Frédéric Babonneau & Alain Haurie & Marc Vielle, 2016. "Assessment of balanced burden-sharing in the 2050 EU climate/energy roadmap: a metamodeling approach," Climatic Change, Springer, vol. 134(4), pages 505-519, February.

    More about this item

    Keywords

    Paris Agreement; emissions trading; NDCs; game theory;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_10624. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.