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Journal Articles Scandinavian Journal of Economics Year : 2016

Agreeing on efficient emissions reduction

Abstract

We propose a simple contest-based mechanism providing incentives to reduce harmful emissions to their efficient level without infringing upon productive efficiency. Participation in the most stylized form of the scheme is voluntary and individually rational; all rules are mutually agreeable and are unanimously adopted if proposed. The scheme balances its budget and requires no principal. In a perhaps more realistic stochastic output version, which could potentially inform policy decisions, we show that the transfers required by the efficient mechanism create a mutual insurance motive that can serve as an effective rationale for the (gradual) formation of international environmental agreements.
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Dates and versions

hal-01484843 , version 1 (21-02-2024)

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Olivier Bos, Beatrice Roussillon, Paul Schweinzer. Agreeing on efficient emissions reduction. Scandinavian Journal of Economics, 2016, 118 (4), pp.785-815. ⟨10.1111/sjoe.12164⟩. ⟨hal-01484843⟩
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