The Effect of Emission Trade on International Environmental Agreements.

This paper analyzes what the effect of the inclusion of emissions trading in an international environmental agreement has on the abatement commitments of the trading countries and on aggregate emissions. We discuss, in a very general model, both the case where countries non-cooperatively set their emission level and the case where emission levels are set cooperatively. Furthermore, in both cases we discuss the situation where countries are price takers and where they can affect the price of emission quotas.