1. Carbon Trading with Imperfectly Observable Emissions.
- Author
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Godal, Odd, Ermoliev, Yuri, Klaassen, Ger, and Obersteiner, Michael
- Subjects
EMISSIONS trading ,CARBON ,EMISSIONS (Air pollution) ,SIMULATION methods & models ,UNCERTAINTY ,UNITED Nations Framework Convention on Climate Change (1992). Protocols, etc., 1997 December 11 - Abstract
The Kyoto Protocol foresees emission trading but does not yet specify verification of (uncertain) emissions. This paper analyses a setting in which parties can meet their emission targets by reducing emissions, by investing in monitoring (reducing uncertainty of emissions) or by (bilaterally) trading permits. We derive the optimality conditions and carry out various numerical simulations. Our applications suggest that including uncertainty could increase compliance costs for the USA, Japan and the European Union. Central Europe and the Former Soviet Union might be able to gain from trading due to higher permit prices. Emissions trading could also lower aggregate uncertainty on emissions. [ABSTRACT FROM AUTHOR]
- Published
- 2003
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