Is International Emissions Trading Always Beneficial?

By M. Babiker, J. Reilly, L. Viguier. 2004

134 citations recorded by the source corpus.

Economic efficiency is a major argument for international emissions trading under the Kyoto Protocol. We show that permit trading can be welfare decreasing for countries, even though private trading parties benefit. The result is a case of “immiserizing” growth in the sense of Bhagwati where the negative terms of trade and tax interaction effects wipe out the gains from trading. Simulation and welfare decomposition results based on a CGE model of the global economy show that under EU-wide trading countries that are net permit sellers generally lose, due primarily to the existence of distortionary energy taxes.

Subfields: Economics and Econometrics, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/667661cd607d158db93356843df3420a74f14f73

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Citations in the corpus

To link or not to link: benefits and disadvantages of linking cap-and-trade systems (2009, background): “In this sense, the multilateral architecture of the EU ETS helped to uphold the environmental ambition of the system.”
The cost of climate policy in the United States (2009, background): “It does not necessarily lead to a welfare optimum in the presence of distortions (e.g., energy taxes) or to the extent combined actions of individual agents have macroeconomic consequences such as affecting the terms of trade of a country/region (Babiker et al., 2004; Paltsev et al., 2007).”