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GTAP Resource #978

"Does Non Ratification of the Kyoto Protocol by the US Increase the Likelihood of Monopolistic Behavior by Russia in the Market of Tradable Permits?"
by Bernard, Alain and Marc Vielle

After the decision by the US not to ratify the Kyoto Protocol, the prospects on the actual working of the world carbon market change dramatically. While in the case of US participation, according to most evaluations, the equilibrium price in 2010 was expected to be in the range of 50 to 100 US$, after the recent US decision it would be considerably smaller, even close to zero in some scenarios. This reflects the fact that the emission credits allocated in excess to Russia and other CIS countries (Hot Air) will be approximately enough to satisfy the potential demand by Annex B countries, even if the latter implement a very modest –and a fortiori none- domestic abatement policy. In such a context, it is very likely that Russia and its Former Soviet Union partners adopt a concerted monopolistic behavior, and sell only a share of available excess permits, in order to maximize receipts. Such a behavior is not, under any circumstance, inconsistent with the Kyoto Protocol considering its provisions on banking, and the possible transfer of unused permits to later periods. The aim of the paper is to simulate the working of the world carbon emissions market under the assumption of monopolistic behavior by FSU. Successively are assessed two profit-maximization schemes, a static one and an inter-temporal. The latter requires to consider a long term horizon (2040), in order to assess the potential gains for FSU of an expected steady increase over time of carbon price. Simulations are implemented through an inter-temporal mathematical program of optimization calibrated on an Applied General Equilibrium model (GEMINI-E3).

JEL Classification: D58, H32, L61, Q43

Resource Details (Export Citation) GTAP Keywords
Category: 2002 Conference Paper
Status: Published
By/In: Presented at the 5th Annual Conference on Global Economic Analysis, Taipei, Taiwan
Date: 2002
Created: Bacou, M. (4/22/2002)
Updated: Batta, G. (2/7/2013)
Visits: 2,843
No keywords have been specified.

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