We examine the optimal management of emission permit markets when banking but not borrowing of permits is allowed. The regulator maximizes expected social welfare through an optimal allocation rule in an infinite horizon setting. The policy is second-best as the emission cap is set before the...

After twenty years of global negotiations, the world is still far from a comprehensive climate agreement. The "top-down" approach embodied by the Kyoto Protocol has all but stalled, chiefly due to disagreements over levels of ambition and objections to financial transfers. To avoid those...

The economic prescription for climate change is clear: price carbon dioxide (CO2) and other greenhouse gas emissions to internalize climate damages. In practice, a variety of political economy constraints prevent the introduction of a carbon price equal to the full social cost of emissions. This...

The UK has pledged to cut greenhouse gases 68 percent below 1990 levels by 2030, to be emissions neutral by 2050, and to phase out internal combustion engine vehicles by 2030. Much progress has been made, but fully achieving these ambitious objectives with the current policy framework will be...

In this paper, we discuss the endogenous formation of climate coalitions in an issue-linkage regime. In particular, we propose to build a link to the issue of preferential free trade. Trade privileges exclusively granted to members of the climate coalition work as an incentive mechanism for...

We develop a 2-period emission trading model for a stock pollutant with demand shocks resolving over time. We find precise conditions for efficiency of a stabilization mechanism where cumulative available permits decrease with excess supply in early periods. Our model describes the stabilization...

We develop a dynamic regulation game for a stock externality under asymmetric information and future market uncertainty. Within this framework, regulation is characterized as the implementation of a welfare-maximization program conditional on informational constraints. We identify the most...

The paper collects comprehensive and detailed data on what 40 OECD and G20 economies do with the revenues from carbon taxes, emissions trading systems, and excise taxes on energy use. It notes that constraints – which can take the form of political commitments or legal earmarks – on revenue...

The present paper analyzes the impact of a climate coalition's border carbon adjustment on emissions from commodity production, welfare and the coalition size. The coalition implements border carbon adjustment to reduce carbon leakage and to improve its terms of trade, while the fringe abstains...

Denmark has a highly ambitious goal of reducing greenhouse gas emissions 70 percent below 1990 levels by 2030. While there is general agreement that carbon pricing should be the centerpiece of Denmark’s mitigation strategy, pricing needs to be effective, address equity and leakage concerns,...