Buy coal? Deposit markets prevent carbon leakage / Bård Harstad.

Format:

Book

Author/Creator:

Harstad, Bård.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16119.

NBER working paper series no. w16119

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

If a coalition of countries implements climate policies, nonparticipants tend to consume more, pollute more, and invest too little in renewable energy sources. In response, the coalition's equilibrium policy distorts trade and is not time-consistent. This paper derives conditions for when trading fossil fuel deposits increase efficiency. In isolation, a bilateral transaction may occur too often or too seldom compared to the optimum. However, when the market clears, the above-mentioned problems vanish, the first-best is implemented, and the coalition finds it optimal to rely entirely on supply-side policies, which are simple to implement in practice.

Notes:

Print version record

June 2010.