Strategic delegation and international permit markets: Why linking May fail

Habla, Wolfgang; Winkler, Ralph

doi:10.1016/j.jeem.2018.09.006

Cited by 15 publications

(9 citation statements)

References 43 publications

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“…This means that mapping emissions to damages via a linear specication is a good approximation. It is also consistent with the current literature (Habla and Winkler, 2018;Holtsmark and Weitzman, 2020).…”

Section: Introducing Functional Forms For the Benet And Damage Functionssupporting

confidence: 93%

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Climate Finance and Emission Reductions: What Do the Last Twenty Years Tell Us?

Gavard

Schoch²

2021

SSRN Journal

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In the framework of the Paris Agreement implementation, nancial transfers remain a major point of negotiation for addressing equity concerns raised by the ambitious climate objectives. In complement to the theoretical, experimental and numerical studies that have examined the role of transfers in facilitating coalitions, we conduct the rst empirical analysis of their impact on national carbon emission reductions. We build on the existing literature to develop a conceptual framework which models continuous national emission choices in the presence of nancial transfers. We infer an equation of the impact of mitigation and adaptation nance on national emissions of recipient countries. We test the derived hypothesis using carbon emissions data of non-OECD countries in the last 20 years. We nd that public adaptation and mitigation nance tend to increase emissions. Private mitigation nance seems to reduce them only after ve years following the transfers.

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Section: Introducing Functional Forms For the Benet And Damage Functionssupporting

confidence: 93%

“…Using the denition employed by Habla and Winkler (2018), we propose the following structural forms for the benet and damage functions. We dene the benet function as…”

Section: Introducing Functional Forms For the Benet And Damage Functionsmentioning

confidence: 99%

Climate Finance and Emission Reductions: What Do the Last Twenty Years Tell Us?

Gavard

Schoch²

2021

SSRN Journal

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“…In a model consistent with several interpretations of strategic delegation, Habla and Winkler (2018) analyze the formation of international emission permit markets. They nd that principals have an incentive to delegate strategically and choose agents that exhibit less green preferences than they do themselves.…”

Section: Hierarchical Interplay Between Domestic Political Pressure and International Climate Policymentioning

confidence: 99%

Domestic Pressure and International Climate Cooperation

Tavoni

Winkler

2021

Annu. Rev. Resour. Econ.

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In the wake of 25 United Nations Climate Change Conferences of the Parties (and counting), international cooperation on mitigating greenhouse gas emissions to avoid substantial and potentially irreversible climate change remains an important challenge. The limited impact of the Kyoto Protocol on curbing emissions, and the gap between the ambitions of its successor and the Paris Agreement's lack of sanctioning mechanisms for addressing noncompliance, demonstrates both the difficulties in negotiating ambitious environmental agreements and the reluctance of countries to comply with their agreed emission targets once they have joined the treaty. Therefore, a better understanding of the obstacles and opportunities that the interactions between domestic and international policy pose for the design of successful international climate cooperation is of utmost importance. To shed light on the roots of the stalemate (and suggest possible ways out), this article reviews and draws lessons from a growing theoretical, experimental, and empirical literature that accounts for the hierarchical interplay between domestic political pressure and international climate policy. Expected final online publication date for the Annual Review of Resource Economics, Volume 13 is October 2021. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

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“…Both papers find that there is no ex ante reason to expect emissions to decline following linkage. Habla and Winkler (2018) also allow for delegation of the domestic permit supply to an agent, leading to wider domestic emission caps, meaning higher emissions, when countries are linked. Lapan and Sikdar (2019) conclude that international trade in emission permits creates incentives for the individual countries to widen their national caps on emissions when pollution is only partially transboundary.…”

Section: Introductionmentioning

confidence: 99%

The dynamics of linking permit markets

Holtsmark

Midttømme²

2021

Journal of Public Economics

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This paper presents a novel benefit of linking emission permit markets. We let countries issue permits non-cooperatively, and with endogenous technology we show there are gains from permit trade even if countries are identical. Linking the permit markets of different countries will turn permit issuance into intertemporal strategic complements. The intertemporal strategic complementarity arises because issuing fewer permits today increases investments in green energy capacity in all permit market countries, and countries with a higher green energy capacity will respond by issuing fewer permits in the future. Hence, each country faces incentives to withhold emission permits when permit markets are linked. Even though countries cannot commit to reducing their own emissions, or punish other countries that do not, the outcome is reduced emissions, higher investments, and increased welfare, compared to a benchmark with only domestic permit trade. We also show that permit market linking can arise as an equilibrium outcome. JEL-Codes: F550, Q540.

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Strategic delegation and international permit markets: Why linking May fail

Cited by 15 publications

References 43 publications

Climate Finance and Emission Reductions: What Do the Last Twenty Years Tell Us?

Climate Finance and Emission Reductions: What Do the Last Twenty Years Tell Us?

Domestic Pressure and International Climate Cooperation

The dynamics of linking permit markets

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