Welfare Gains under Tradable CO2 Permits
It is easy to understand the opposition to liberalized trade in established markets: Domestic producers lose from increased foreign competition. It is harder to understand the opposition to creating markets, including international markets, where they currently do not exist. Many economists and policymakers have proposed establishing tradable carbon permits to decrease the cost of reducing global carbon emissions. Since, as of 2001, there are no enforceable ceilings on emissions, the right to emit carbon has no market value. Emissions permits are not commodities. The usual forces that oppose market liberalization are obviously not present in this (proposed) market.
KeywordsGross Domestic Product Ordinary Little Square Equilibrium Price Welfare Gain Environmental Kuznets Curve
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