Countries often have private information about their willingness to pay for protecting the climate system and their cost of emission reductions. We use a principal-agent model to re-examine the economic case for unilateral action by individual countries, in our case of the principal. We …nd that the incentive structure that arises in an incomplete information framework can motivate (i) unilater...

We develop a model to analyze environmental policies in the presence of mergers and foreign direct investment. There are two countries and two type of firms (one type in each country). Firms in each country produce a homogeneous good to be consumed in both markets. Each firm creates pollution as a by product of output. Using the above specification, we examine the consequences of two alternativ...

This paper studies the effects of effluent taxes on firms’ allocation of resources to cost-reducing and emission-reducing R&D, and on entrepreneurs’ decisions to develop new goods and enter the market. A tax set at an exogenous rate that does not depend on the state of technology reduces growth, the level of consumption of each good, and raises the number of firms. The induced increase in the v...

Its protocol calls for Annex B counties to reduce their average greenhouse gas emissions over 2008-2012 to at least five percent below 1990 levels. It adopted a " Plan of Action. " Since no details were given at these COPs, we have to design the mechanisms. 3 3. Which Trading Rule? • Bilateral Trading Is it inefficient due to mismatching? Does the revelation of contracted prices improve its eff...

This paper proposes a computable stochastic equilibrium model to represent the possible competition between Russia and China on the international market of carbon emissions permits. The model includes a representation of the uncertainty concerning the date of entry of developing countries (e.g. China) on this market in the form of an event tree. Assuming that this date of entry is an uncontroll...

The social cost of carbon (SCC) is estimated by integrated assessment models (IAMs) and widely used government agencies to value climate policy impacts. Although there an ongoing debate about obtained numerical estimates related uncertainties, little attention has been paid so far the SCC calculation method itself. This work attempts fill gap providing theoretical background economic interpreta...

A portfolio of agricultural practices is now available that can contribute to reaching European mitigation targets. Among them, the management of agricultural soils has a large potential for reducing GHG emissions or sequestering carbon. Many of the practices are based on well tested agronomic and technical know-how, with proven benefits for farmers and the environment. A suite of practices has...

Disagreement over the form of regulation of greenhouse gasses motivates a comparison of market based and command and control policies. More efficient policies can increase aggregate marginal abatement cost, resulting in higher emissions. Multiple investment equilibria and “regulatory uncertainty” arise when firms anticipate command and control policies. Market based policies eliminate this unce...

The price of EU allowances (EUAs) in the EU Emissions Trading Scheme (EU ETS) fell from almost 30€/tCO2 in mid-2008 to less than 5€/tCO2 in mid-2013. The sharp and persistent price decline has sparked intense debates both in academia and among policy-makers about the decisive allowance price drivers. In this paper we examine whether and to what extent the EUA price drop can be justified by thre...