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Hot Air for Sale: A Quantitative Assessment of Russia's Near-Term Climate Policy Options

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  • Böhringer, Christoph
  • Moslener, Ulf
  • Sturm, Bodo

Abstract

Since January 1st the European Union has launched an EU-internal emissions trading scheme (EU ETS) for emission-intensive installations as the central pillar to comply with the Kyoto Protocol. The EU ETS may be linked at some time to a Kyoto emissions market where greenhouse gas emission allowances of signatory Kyoto countries can be traded. In this paper we investigate the implications of Russian market power for environmental effectiveness and regional compliance costs to the Kyoto Protocol taking into account potential linkages between the Kyoto emissions market and the EU ETS. We find that Russia may have incentives to join the EU ETS as long as the latter remains separated from the Kyoto international emissions market. In this case, Russia can exert monopolistic price discrimination between two separated markets thereby maximizing revenues from hot air sales. The EU will be able to substantially reduce compliance costs when it does not restrain itself to EU-internal emission regulation schemes. However, part of the gains from extra-EU emissions trading will come at the expense of environmental effectiveness as (more) hot air will be drawn in.

Suggested Citation

  • Böhringer, Christoph & Moslener, Ulf & Sturm, Bodo, 2006. "Hot Air for Sale: A Quantitative Assessment of Russia's Near-Term Climate Policy Options," ZEW Discussion Papers 06-016, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:4595
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    Cited by:

    1. Tsung-Chen Lee & Hsiao-Chi Chen & Shi-Miin Liu, 2013. "Optimal strategic regulations in international emissions trading under imperfect competition," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 15(1), pages 39-57, January.
    2. Anger, Niels, 2006. "Emission trading beyond Europe: linking schemes in a post-Kyoto world," ZEW Discussion Papers 06-058, ZEW - Leibniz Centre for European Economic Research.
    3. Frank Jotzo & Regina Betz, 2009. "Linking the Australian Emissions Trading Scheme," Environmental Economics Research Hub Research Reports 0914, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
    4. Larson, Donald F. & Ambrosi, Philippe & Dinar, Ariel & Rahman, Shaikh Mahfuzur & Entler, Rebecca, 2008. "Carbon markets, institutions, policies, and research," Policy Research Working Paper Series 4761, The World Bank.
    5. N. Anger & B. Brouns & J. Onigkeit, 2009. "Linking the EU emissions trading scheme: economic implications of allowance allocation and global carbon constraints," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(5), pages 379-398, June.
    6. Böhringer, Christoph & Rosendahl, Knut Einar, 2009. "Strategic partitioning of emission allowances under the EU Emission Trading Scheme," Resource and Energy Economics, Elsevier, vol. 31(3), pages 182-197, August.
    7. Godal Odd & Meland Frode, 2010. "Permit Markets, Seller Cartels and the Impact of Strategic Buyers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-33, April.
    8. Tsung-Chen Lee, 2011. "Endogenous market structures in non-cooperative international emissions trading," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 16(6), pages 663-675, August.
    9. Elias Asproudis & Maria José Gil-Moltó, 2009. "Technological choice under environmentalists’ participation in Emissions Trading Systems," Discussion Papers in Economics 09/9, Division of Economics, School of Business, University of Leicester.
    10. Julien Chevallier, 2009. "Intertemporal Emissions Trading and Allocation Rules: Gainers, Losers and the Spectre of Market Power," Working Papers halshs-00124713, HAL.

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    More about this item

    Keywords

    market power; hot air; climate policy;
    All these keywords.

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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