International Climate Regime Beyond 2012: Are Quota Allocation Rules Robust to Uncertainty?

39 Pages Posted: 20 Apr 2016

See all articles by Franck Lecocq

Franck Lecocq

World Bank - Development Economics Research Group - PFCplus Research

Renaud Crassous

World Bank

Date Written: March 2003

Abstract

Bringing the United States and major developing countries to control their greenhouse gas emissions will be the key challenge for the international climate regime beyond the Kyoto Protocol. But in the current quantity-based coordination, large uncertainties surrounding future emissions and future abatement opportunities make the costs of any commitment very difficult to assess ex ante, hence a strong risk that the negotiation will be stalled.

Lecocq and Crassous use a partial equilibrium model of the international allowance market to quantify the economic consequences of the main post-Kyoto quota allocation rules proposed in the literature and to assess how robust these consequences are to uncertainty on future population, economic, and emissions growth. They confirm that, regardless of the rule selected, the prices of allowances and the net costs of climate mitigation for all parties are very sensitive to uncertainty, and in some scenarios very large. This constitutes a strong barrier against adopting any of these schemes if no additional mechanism is introduced to limit the uncertainty on costs. On the other hand, parties' preferred (least-cost) rules are essentially robust to uncertainty. And although these preferences differ across countries, the authors' analysis suggest some bargaining is possible if developing countries make a commitment and join the allowance market earlier in exchange for tighter quotas in the North. This underscores the importance of the rules governing the entry of new parties into the coordination. But the magnitude of the win-win potential strongly depends on how different abatement costs are assumed to be between industrial and developing countries, and on how long that gap is assumed to persist.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to assess policies for mitigating climate change.

Suggested Citation

Lecocq, Franck and Crassous, Renaud, International Climate Regime Beyond 2012: Are Quota Allocation Rules Robust to Uncertainty? (March 2003). World Bank Policy Research Working Paper No. 3000. Available at SSRN: https://ssrn.com/abstract=636362

Franck Lecocq (Contact Author)

World Bank - Development Economics Research Group - PFCplus Research ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-1000 (Phone)
202-477-6391 (Fax)

Renaud Crassous

World Bank

1818 H Street, N.W.
Washington, DC 20433
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
100
Abstract Views
962
rank
261,867
PlumX Metrics