Environmental and Resource Economics

, Volume 4, Issue 3, pp 219–239 | Cite as

Fairness in a tradeable-permit treaty for carbon emissions reductions in Europe and the former Soviet Union

  • Peter Bohm
  • Bjorn Larsen
Article

Abstract

This paper evaluates the distributional implications of alternative permit allocations in a tradeable permit regime for carbon emissions reductions (20% below baseline) in 2010 for a region consisting of Europe and the states of the former Soviet Union (FSU). Participation in such a regime is expected to hinge on the “fairness” of the distributional consequences. We find that initial permit allocations by populationand/or GDP are unlikely to induce participation by most countries of Eastern Europe and FSU because of the net costs involved. We identify a set of initial allocations that would at least compensate these countries. A fair treatment of the countries in Western Europe (WE) is here one which equalizes net costs perGDP. For a wide set of cost functions for carbon emission reductions, the cost gains that WE would reap from a tradeable permit system relative to unilateral reductions by WE as a group are found to be on the order of 85 percent. This would imply, among other things, a significant increase in WE'scapacity to make further emissions reductions.

Key words

Carbon emissions reductions tradeable permits equity 

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Copyright information

© Kluwer Academic Publishers 1994

Authors and Affiliations

  • Peter Bohm
    • 1
  • Bjorn Larsen
    • 2
  1. 1.Department of EconomicsStockholm UniversityStockholmSweden
  2. 2.the World BankN.W. Washington, D.C.USA

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