We consider a two small open economies model with cross-border pollution that is generated from consumption. Within this framework we examine i) the non-cooperative equilibrium consumption taxes and compare them to when pollution is only local, ii) the cooperative equilibrium consumption taxes...

We show how corrective taxation can improve the efficiency properties of tradable quotas systems affected by market power. Indeed, when only a subset of firms are price takers while the remaining firms enjoy market power, we show that, if the regulator sets an ad hoc taxation on firms' traded...

We consider an international emissions trading scheme with partial sectoral and regional coverage. Sectoral and regional expansion of the trading scheme is beneficial in aggregate, but not necessarily for individual countries. We simulate international CO2 emission quota markets using marginal...

We analyze the implication of different allocation schemes of CO2-emission permits for stability and the success of international climate agreements. Our model combines a game theoretical with an empirical module that comprises 12 world regions and captures important dynamic aspects of the...