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CEIC-01-02

"Multi-lateral emission trading: Implications for international efforts from two U.S. examples."

Alexander E. Farrell and M. Granger Morgan.

Abstract:
Common property regimes that privatize international common pool resources are often proposed as efficient means of managing environmental problems. One such approach is the use of marketable emission allowances to control atmospheric pollution, most common in the United States, which has been suggested for the control of greenhouse gas (GHG) emissions in order to avoid dangerous changes to the earth’s climate. A significant problem for the development of such common property regimes is heterogeneity among potential participants. Another is the set of practical difficulties associated with establishing and operating an emission trading program. This problem is exacerbated for the case of international GHG emissions by the lack of examples of multi-lateral emissions trading programs from which lessons for successful implementation can be drawn. This paper looks at two such efforts to establish inter-state marketable emissions permit programs for the control of nitrogen oxides (NOX) in the eastern United States, focusing on the implications of heterogeneity among the participants and practical aspects of emissions trading.

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