Trading sulphur emissions under the Second Sulphur Protocol

摘要

Emission trading is a potent policy instrument in theoretical analyses of environmental policy. However, trading in emission quotas of non-uniformly dispersed pollutants requires that the offsetting quantities vary with location of sources. Such a system is not yet in use. The Second Sulphur Protocol for Europe makes it possible to try out a system of 'exchange rates' through a clause allowing 'joint implementation' of emission reductions. In this report, the authors investigate some properties of a system with exogenous exchange rates within a simultaneous trade model based on cost efficiency. Incorporation of constraints on depositions in third party countries may be necessary in order to get third party country cooperation. It is demonstrated that imposition of constraints is feasible, but it is also revealed what demands such incorporation places on the design of the institutional setting. Constraints on trade should only be introduced when the concern for the environment of the various receptors fail to be captured adequately by the calibration of the exchange rates. 16 refs., 2 figs., 3 tabs.