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Tradable emission quotas, technical progress and climate change*

Published online by Cambridge University Press:  31 July 2008

I.G. Bertram
I.G. Bertram
Affiliation:
Faculty of Commerce and Administration, Victorian University of Wellington, PO Box 600, Wellington, New Zealand
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Abstract

The paper reviews two alternative rules for allocation of property rights in a global greenhouse-gas emissions budget, assuming implementation of a tradablequota arrangement. These are the per capita rule and no-regrets-for-the-South (NRFTS) rule. The operation of a quota market under these alternative regimes is simulated on a spreadsheet, using 1990–1 data from 125 countries. A significant result is that once the South has secured a quota allocation based on the per capita principle, it stands collectively to lose from progress in abatement technology because of the strong link from technical progress to the world market price of quota. The more restricted NRFTS rule gives the South smaller gains from the quota system, but enables it to retain some of the rents from its own technical progress. Some implications for the South's position in future negotiations are noted.

Type
Policy Options
Information
Environment and Development Economics , Volume 1 , Issue 4 , October 1996 , pp. 465 - 487
Copyright
Copyright © 1996, Cambridge University Press

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