Global Climate Change and the Equity-Efficiency Puzzle

Manne, Alan S.; Stephan, Gunter (April 2003). Global Climate Change and the Equity-Efficiency Puzzle (Diskussionsschriften 03-06). Bern: Universität Bern Volkswirtschaftliches Institut

Preview

Text dp0306.pdf - Published Version Available under License Creative Commons: Attribution (CC-BY). Download (327kB) | Preview

There is a broad consensus that the costs of abatement of global climate change can be reduced efficiently through the assignment of quota rights, and through international trade in these rights. But there is no consensus on whether the initial assignment of emission permits can affect the Pareto-optimal global level of abatement. This paper provides some insight into the equity-efficiency puzzle. Qualitative results are obtained from a small-scale model, and then quantitative evidence of separability
is obtained from MERGE, a multi-region integrated assessment model. It is shown that if all the costs of climate change can be expressed in terms of GDP losses, Pareto-efficient abatement strategies are independent of the initial allocation of emission rights. This is the case sometimes described as “market damages”. If, however, different regions assign different values to non-market damages such as species losses, different sharing rules may affect the Pareto-optimal level of greenhouse gas abatement. Separability may then be demonstrated only in specific cases (e.g. identical welfare functions or quasi-linearity of preferences or small shares of wealth devoted to abatement).

Interest & Impact

Downloads

169 since deposited on 11 Jun 2020
40 in the past 12 months

Citations

5 Citations in Web of Science ®
6 Citations in Scopus

Search

in Google Scholar™

Services

Actions (login required)

Edit item

Actions (login required)

Edit item