Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279375 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10624
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
The Nationally Determined Contributions (NDCs) under the Paris Agreement fall short of the abatement needed to reach the 2°C target. Emissions trading could be a "costless" means to reduce the ambition gap if countries used their gains from trade for additional abatement. However, this requires cooperative behavior. We show that with emissions trading, countries' non-cooperative choices of emissions reduction contributions can lead to even more abatement, provided that these contributions may not be lower than initial NDCs. Intuitively, countries with high climate damages raise their contributions if they can meet them partly through abatement in countries with low abatement costs.
Subjects: 
Paris Agreement
emissions trading
NDCs
game theory
JEL: 
H23
Q54
Q56
Q58
C72
Document Type: 
Working Paper
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