Working Paper: CEPR ID: DP4299
Authors: Barbara Buchner; Carlo Carraro
Abstract: This Paper analyses whether different emission trading regimes provide different incentives to participate in a cooperative climate agreement. Different incentive structures are discussed for those countries, namely the US, Russia and China, that are most important in the climate negotiation process. Our analysis confirms the conjecture that, by appropriately designing the emission-trading regime, it is possible to enhance the incentives to participate in a climate agreement. Therefore, participation and optimal policy should be jointly analysed. Moreover, our results show that the US, Russia and China have different most preferred climate coalitions and therefore adopt conflicting negotiation strategies.
Keywords: agreements; climate; incentives; negotiations; policy
JEL Codes: C72; H23; Q25; Q28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| design of an emission trading regime (Q58) | participation incentives (J33) |
| US withdrawal from Kyoto Protocol (F64) | permit prices (P22) |
| permit prices (P22) | R&D investments (O32) |
| R&D investments (O32) | environmental damage (Q53) |
| environmental damage (Q53) | output growth (O40) |
| China's participation in emissions trading (F64) | abatement costs for the US (Q52) |
| US's decision (F59) | R&D investments (O32) |
| US's withdrawal (F59) | Russia's bargaining power (D74) |