Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185423
Authors: 
Weitzman, Martin L.
Holtsmark, Bjart J.
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7225
Abstract: 
Linkage of cap-and-trade systems is typically advocated by economists on a general analogy with the beneficial linking of free-trade areas and on the specific grounds that linkage will ensure cost effectiveness among the linked jurisdictions. An appropriate and widely accepted specification for the damages of carbon dioxide (CO2) emissions within a relatively short (say 5-10 year) period is that marginal damages for each jurisdiction are constant (although they can differ among jurisdictions). With this defensible assumption, the analysis is significantly clarified and yields simple closed-form expressions for all CO2 permit prices. Some implications for linked and unlinked voluntary CO2 cap-and-trade systems are derived and discussed.
Subjects: 
linkage
cap and trade
pollution
climate change
JEL: 
Q50
Q51
Q52
Q54
Q58
Document Type: 
Working Paper

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