The European Union's potential for strategic emissions trading through minimal permit sale contracts

Arbeitspapier

Strategic market behavior by permit sellers will harm the European Union as the EU as a whole is expected to become a large net buyer of permits in a follow-up agreement to the Kyoto Protocol. In this paper we explore how the EU could benefit from making permit trade agreements with non-EU countries. These trade agreements involve a minimum permit sales requirement complemented by a financial transfer from the EU to the other contract party. Such agreements enable the EU to act strategically in the permit market on behalf of its member states, although each member state is assumed to behave as a price taker in the permit market. Using a stylized numerical simulation model we show that an appropriately designed permit trade agreement between the EU and China can cut EU's total compliance cost significantly. This result is robust for a wide range of parameterizations of the simulation model.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 2809

Classification and Topics

• Classification: Wirtschaft ; Climate; Natural Disasters and Their Management; Global Warming
• Subject: emissions permit ; post-Kyoto climate agreement ; strategic permit trade ; Emissionshandel ; Klimaschutz ; Internationale Umweltpolitik ; Folgekosten ; EU-Staaten ; Internationales Abkommen ; China

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Eyckmans , Johan ; Hagem , Cathrine
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/30552
• Last update: 10.03.2025, 11:41 AM CET