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International Emission Permit Markets with Refunding

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  • Gersbach, Hans
  • Winkler, Ralph

Abstract

We propose a blueprint for an international emission permit market such as the EU trading scheme. Each country decides on the amount of permits it wants to offer. A fraction of these permits is grandfathered, the remainder is auctioned. Revenues from the auction are collected in a global fund and reimbursed to member countries in fixed proportions. We show that international permit markets with refunding lead to outcomes in which all countries tighten the issuance of permits and are better off compared to standard international permit markets. If the share of grandfathered permits is sufficiently small, we obtain approximately socially optimal emission reductions.

Suggested Citation

  • Gersbach, Hans & Winkler, Ralph, 2008. "International Emission Permit Markets with Refunding," CEPR Discussion Papers 7035, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:7035
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    More about this item

    Keywords

    Climate change mitigation; Global refunding scheme; International agreements; International permit markets; Tradeable permits;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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