Emissions trading, Green quotas, Overlapping regulation, D61, H21, H22, Q58,

This paper uses a numerical model to examine the long-run impact of a radical liberalization of the West-European natural gas markets. We study profit maximizing Cournot producers facing an ideal third party access regime for gas transport. Producers sell gas either to large users in the manufacturing industry and to gas-fired thermal power plants, or to local distribution companies. We first examine the case where no traders exploit arbitrage possibilities and some producers have limited access to the markets. In this equilibrium net prices differ across markets. These differences disappear in the second case where traders are introduced. The third case focuses on a complete European market for natural gas in which traders exploit all arbitrage possibilities and all producers can sell gas in all markets. We also study the impact on the complete European market of changes in costs for production, transport, and distribution. Finally, welfare implications from a liberalization of the West-European natural gas markets are discussed. We argue that a radical liberalization could increase economic welfare in Western Europe by 15% to 20% in the long run.

No abstract

Climate change, Environmental policy, Technological change, Research and development, H21, O30, Q42,

Abstract:Cost-effective environmental policy generally requires that all emission sources are faced with the same tax. In this paper I discuss how the existence of induced technological change may alter this result, if at least some of the effect is external to the firm. Focusing on learning by doing effects in abatement activities, it is shown that emission sources with external learning effects should be faced with a higher tax than emission sources with only autonomous technological change. By using simple numerical simulations, it is further investigated to what degree a cost-effective climate policy differs from a free quota market, under various assumptions about learning effects, diffusion of technology and environmental targets. The results indicate that optimal taxes may be significantly higher in the industrial world than in the developing world. Moreover, the industrial world's share of global abatement may be much higher in a cost-effective solution than in a free quota market. The global cost savings of a fully flexible implementation of the Kyoto Protocol are further questioned, as potential spillover effects of technological growth in the industrial world are not internalised in the market.

No abstract

The Paris Agreement can be strengthened by a treaty limiting global fossil fuel supply

Abstract:Given the bleak prospects for a global agreement on mitigating climate change, pressure for unilateral abatement is increasing. A major challenge is emissions leakage. Border carbon adjustments and output-based allocation of emissions allowances can increase effectiveness of unilateral action but introduce distortions of their own. We assess antileakage measures as a function of abatement coalition size. We first develop a partial equilibrium analytical framework to see how these instruments affect emissions within and outside the coalition. We then employ a computable general equilibrium model of international trade and energy use to assess the strategies as the coalition grows. We find that full border adjustments rank first in global cost-effectiveness, followed by import tariffs and output-based rebates. The differences across measures and their overall appeal decline as the abatement coalition grows. In terms of cost, the coalition countries prefer border carbon adjustments; countries outside the coalition prefer output-based rebates. Keywords SammendragGitt dystre utsikter til å få på plass en global klimaavtale, øker presset for unilaterale (nasjonale/regionale) utslippsreduksjoner. En viktig utfordring er karbonlekkasje. Karbontoll og produksjonsbasert tildeling av kvoter kan øke effektiviteten av unilateral karbonprising, men kan også slå uheldig ut. Vi vurderer ulike virkemidler for å redusere karbonlekkasje som følge av karbonprising, og ser på hvordan effektiviteten av virkemidlene avhenger av hvor mange land som støtter opp om en felles karbonpris. Vi bruker først en partiell likevekstsmodell for å se hvordan de ulike virkemidlene påvirker utslippene i land med og uten karbonpris. Deretter bruker vi en detaljert generell likevekstmodell for å studere dette mer inngående. Vi finner at en kombinasjon av karbontoll og eksportrefusjon er det mest kostnadseffektive virkemidlet, fulgt av kun karbontoll og dernest produksjonsbasert tildeling av kvoter. Effektivitetsgevinsten av virkemidlene avtar etter som flere land innfører karbonprising. Mens karbontoll er mest gunstig for de landene som innfører dette (som supplement til karbonprising), er produksjonsbasert tildeling gunstigst for landene uten klimapolitikk.4