Scandinavian Working Papers in Economics

Research Papers in Economics,
Stockholm University, Department of Economics

No 2002:10: Improving Cost-effectiveness and Facilitating Participation of Developing Countries in International Emissions Trading

Peter Bohm
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Peter Bohm: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden

Abstract: This paper discusses ways in which the next climate agreement ­ a renegotiated Kyoto Protocol or a second-period agreement ­ can be made more cost-effective. The discussion focuses on the design of international emissions trading to facilitate early participation by developing countries. Four aspects are highlighted: the design of compensation rules, the need to regulate the use of the CDM, the effect of allowing borrowing and the implications of a Commitment Period Reserve.

Keywords: Climate change policy; cost effectiveness; international emissions trading; Kyoto protocol; Clean Development Mechanism; Commitment Period Reserve; developing countries

JEL-codes: Q25; Q28

18 pages, September 20, 2001

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