International emission policy with lobbying and technological change
Authors: Palokangas T
Publication Year: 2010
Reference: In Dynamic Systems, Economic Growth, and the Environment, J. Crespo Cuaresma, T. Palokangas, A. Tarasyev (eds)
Springer-Verlag, Heidelberg, Germany pp.161-181
[ISBN 978-3-642-02131-2]
Abstract
I examine emission policy in a union of countries when production in any country incurs emissions that pollute all over the union, but efficiency in production is improved by research and development (R&D). I compare four cases: Laissez-faire, Pareto optimal policy, and the case of a self-interested central planner that decides on nontraded or traded emission quotas. I show that with nontraded quotas, the growth rate is socially optimal, but welfare sub-optimal. Trade in quotas speeds up growth from the initial position of laissez-faire, but slows down growth from the initial position of nontraded quotas.