The Effectiveness of International Emission Trading under Imperfect Competition

• Main Authors: Cheng, Kuei-Yuan, 鄭貴元
• Other Authors: LEE, TSUNG-CHEN
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/58969146071551636588

碩士 === 國立臺北大學 === 經濟學系 === 95 === The basic idea of “Tradable Emission Rights” was originated from Coocker (1966). Since then there has been a variety of researches on “Emission Trading (ET)”. Such idea has also been widely used in practical policy work for years. The focus of the early researches and the application areas is on local pollution. Many evidences showed that ET is an effective instrument in both pollution control and cost reduction. In 1997, it was declared in the Kyoto Protocol that “International Emission Trading (IET)” is one of the flexible mechanisms to abate the global greenhouse gases, which allows the commitment countries to cooperatively achieve the abatement target through transnational emission trading. Afterward the application area of ET is extended to global pollution control. Given the fact that the participants in the international market are government-based, however, the number of the participants would be much fewer than that in the domestic market, leading to the consequence that some countries are likely to have market power. It is hence worthy to explore the cost-effectiveness of IET under imperfect competition. Furthermore, there does not exist an international central authority who can take in charge of allocating the emission allowances. Each of the participating countries chooses its allowances based on self-interested motivations. This fact stimulates our interests in exploring the environmental effectiveness of IET. This paper develops a sequential game of emission trading to explore the cost effectiveness and the environmental effectiveness of IET under imperfect competition. Based on the results of qualitative analysis and those of quantitative numerical simulations, the insights which emerge from this paper are summarized as follows: (1) In the case that the international trading market is imperfect competitive, if the actual emissions of the dominant country are not equal to its emission allowances, the trading system is not of effectiveness in cost savings. (2) The amount of the total allowances in the case of monopsony is the least, as compared to that of monopoly, that of perfect competition, and that of no trading. (3) The results of the sensitivity analysis show that the value of the damage parameter of the dominant country has a positive impact on its costs but a negative impact on the costs of the other countries. If this value is sufficiently high, the market structure is expected to be monopsony. In such a case, individual country is more likely to participate in the international trading system.