Advertisement

Empirica

, Volume 39, Issue 2, pp 191–215 | Cite as

Climate policy targets in emerging and industrialized economies: the influence of technological differences, environmental preferences and propensity to save

  • Birgit Bednar-FriedlEmail author
Original Paper

Abstract

Although emerging economies claim that industrialized countries need to reduce their carbon emissions first, stabilization of the future global climate system requires immediate action by all countries. In a stylized two-country intertemporal general equilibrium model, we derive welfare maximizing emission caps in emerging and industrialized countries, taking account of country differences in technology, environmental preferences and propensity to save. Simultaneous target setting is compared to a sequential one in which the industrialized country commits itself to binding targets first. In the latter case, when the industrialized economy has stronger environmental preferences and a lower relative pollution production share, the industrialized economy can increase its joint economic and environmental welfare by setting a laxer target. On the other hand, when the emerging economy has considerably higher environmental preferences, our results suggest that the industrialized economy will choose a more restrictive target in a sequential setting than in a simultaneous one, contrary to first thought that a first mover is always pursuing a ‘symbolic’ policy with a lax target.

Keywords

Carbon emissions Emissions trading Technological differences Environmental preferences Welfare 

Notes

Acknowledgments

I would like to thank two anonymous referees for helpful suggestions and Karl Farmer and Karl Steininger for comments on an earlier version of the paper.

References

  1. Azariadis C (1993) Intertemporal macroeconomics. Blackwell, OxfordGoogle Scholar
  2. Bagwell K, Staiger RW (1999) An economic theory of GATT. Am Econ Rev 89(1):215–248CrossRefGoogle Scholar
  3. Bárcena-Ruiz JC (2006) Environmental taxes and first mover advantages. Environ Resour Econ 35:19–39CrossRefGoogle Scholar
  4. Barrett S (1994) Self-enforcing international environmental agreements. Oxf Econ Pap 46:878–894Google Scholar
  5. Bednar-Friedl B, Farmer K (2010) External balance, dynamic efficiency, and the welfare effects of unilateral and multilateral permit policies in interdependent economies. Econ Model 27(5):980–990CrossRefGoogle Scholar
  6. Bednar-Friedl B, Farmer K (2011) Nationally and internationally optimal climate policies: External balances versus environmental preferences. CESifo Econ Stud 57(3):432–457CrossRefGoogle Scholar
  7. Bednar-Friedl B, Farmer K (2012) Public debt, terms of trade and welfare: the role of capital production shares, external balances, and dynamic (in)efficiency. Int Econ J (forthcoming)Google Scholar
  8. Bianconi M (2003) Fiscal policy and the terms of trade in an analytically tractable two-country dynamic model. Int Tax Public Finance 10:25–41CrossRefGoogle Scholar
  9. Böhringer C, Vogt C (2004) The dismantling of a breakthrough: the Kyoto Protocol as symbolic policy. Euro J Polit Econ 20:597–617CrossRefGoogle Scholar
  10. Bréchet T, Lambrecht S, Prieur F (2009) Intertemporal transfers of emission quotas in climate policies. Econ Model 26:126–134CrossRefGoogle Scholar
  11. Bréchet T, Eyckmans J, Gerard F, Marbaix P, Tulkens H, Ypersele JPV (2010) The impact of unilateral EU commitment on the stability of international climate agreements. Clim Policy 10:148–166CrossRefGoogle Scholar
  12. Brechin SR (2010) Comparative public opinion and knowledge on global climatic change and the Kyoto protocol: The U.S. versus the world? Int J Soci Soc Pol 12:1–26Google Scholar
  13. Buchner B, Carraro C (2004) Emission trading regimes and incentives to participate in international climate agreements. Euro Environ 14:276–289CrossRefGoogle Scholar
  14. Carbone JC, Helm C, Rutherford TF (2009) The case for international emission trade in the absence of cooperative climate policy. J Environ Econ Manage 58:266–280CrossRefGoogle Scholar
  15. Carraro C, Siniscalco D (1998) International environmental agreements: incentives and political economy. Euro Econ Rev 42(3–5):561–572CrossRefGoogle Scholar
  16. Copeland BR, Taylor MS (2005) Free trade and global warming: a trade theory view of the Kyoto protocol. J Environ Econ Manage 49:205–234CrossRefGoogle Scholar
  17. de la Croix D, Michel P (2002) A theory of economic growth. Dynamics and policy in overlapping generations. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  18. Durlauf S, Johnson P (1995) Multiple regimes and cross—country growth behaviour. J Appl Econometrics 10:365–384CrossRefGoogle Scholar
  19. Edenhofer O, Knopf B, Barker T, Baumstark L, Bellevrat E, Chateau B, Criqui P, Isaac M, Kitous A, Kypreos S, Leimbach M, Lessmann K, Magné B, Şerban Scrieciu, Turton H, van Vuuren DP (2010) The feasibility of low concentration targets: an application of FUND. Ene J 31:11–48Google Scholar
  20. Eyckmans J, Finus M (2007) Measures to enhance the success of global climate treaties. Int Environ Agreem-P 7:73–97CrossRefGoogle Scholar
  21. Eyckmans J, Kverndock S (2010) Moral concerns on tradeable pollution permits in international environmental agreements. Ecol Econ 69:1814–1823CrossRefGoogle Scholar
  22. Grossman GM, Helpman E (1994) Protection for sale. Am Econ Rev 87:940–956Google Scholar
  23. Helm C (2003) International emissions trading with endogenous allowance choices. J Public Econ 87:2737–2747CrossRefGoogle Scholar
  24. Hoel M (1991) Global environmental problems: the effects of unilateral actions taken by one country. J Environ Econ Manage 20:55–70CrossRefGoogle Scholar
  25. IMF (2011) World economic outlook. Tech. Rep. April 2011, International Monetary Fund, Washington DCGoogle Scholar
  26. John A, Pecchenino R (1994) An overlapping generations model of growth and the environment. Econ J 104:1393–1410CrossRefGoogle Scholar
  27. Jouvet PA, Michel P, Rotillon G (2005) Optimal growth with pollution: how to use pollution permits?. J Econ Dyn Cont 29(9):1597–1609CrossRefGoogle Scholar
  28. Kuik O, Brander L, Tol RS (2009) Marginal abatement costs of greenhouse gas emissions: a meta-analysis. Energy Policy 37:1395–1403CrossRefGoogle Scholar
  29. Lorenzoni I, Pidgeon NF (2006) Public views on climate change: European and USA perspectives. Clim Change 77:73–95CrossRefGoogle Scholar
  30. Ma G, Yi W (2010) Why is the Chinese saving rate so high. World Econ 12:1–26Google Scholar
  31. MacKenzie I (2011) Tradable permit allocations and sequential choice. Resour Energy Econ 33:268–278CrossRefGoogle Scholar
  32. Nadiri MI, Prucha IR (1996) Estimation of the depreciation rate of physical and R&D capital in the U.S. total manufacturing sector. Econ Inquiry XXXIV:43–56CrossRefGoogle Scholar
  33. Ono T (2002) The effects of emission permits on growth and the environment. Environ Resour Econ 21:75–87CrossRefGoogle Scholar
  34. Osmani D, Tol R (2009) Toward farsightedly stable international environmental agreements. J Public Econ Theory 11:455–492CrossRefGoogle Scholar
  35. Pearce D (2003) The social cost of carbon and its policy implications. Oxf Rev Econ Pol 19:362–384CrossRefGoogle Scholar
  36. Peterson EB, Schleich J, Duscha V (2010) Environmental and economic effects of the Copenhagen pledges and more ambitious emission reduction targets. Energy Policy 38:4582–4591CrossRefGoogle Scholar
  37. Reiner DM, Curry TE, Figueiredo MAD, Herzog HJ, Ansoabehere SD, Itaoka K, Johnsson F, Odenberger M (2006) American exceptionalism? Similarities and differences in national attitudes toward energy policy and global warming. Environ Sci Technol 40(7):2093–2098CrossRefGoogle Scholar
  38. Rong F (2010) Understanding developing country stances on post-20132 climate change negotiations: comparative analysis of Brazil, China, India, Mexico, and South Africa. Energy Policy 38:4582–4591CrossRefGoogle Scholar
  39. Schmidt RC, Marschinski R (2010) Can China benefit from adopting a binding emission agreement. Energy Policy 38:3763–3770CrossRefGoogle Scholar
  40. Smulders S, Gradus R (1996) Pollution abatement and long-term growth. Euro J Polit Econ 12:505–532CrossRefGoogle Scholar
  41. Stern N (2006) The economics of climate change: the Stern review. Cambridge University Press, CambridgeGoogle Scholar
  42. Tol R (2001) Climate coalitions in an integrated assessment model. Compu Econ 18:159–172CrossRefGoogle Scholar
  43. Weikard HP, Dellink R, van Ierland E (2010) Renegotiations in the greenhouse. Environ Resour Econ 45:573–596CrossRefGoogle Scholar
  44. World Bank (2010) World development report 2010: development and climate change. Tech. rep., World Bank, Washington DCGoogle Scholar
  45. World Bank (2011) State and trends of world carbon markets 2011. Tech. rep., World Bank, Washington DCGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of GrazGrazAustria
  2. 2.Wegener Center for Climate and Global ChangeUniversity of GrazGrazAustria

Personalised recommendations