capital allocation and international equilibrium with pollution permits国际资本分配和平衡污染许可证.pdfVIP

Modern Economy, 2012, 3, 187-199 /10.4236/me.2012.32026 Published Online March 2012 (http://www.SciRP.org/journal/me) Capital Allocation and International Equilibrium * with Pollution Permits Pierre-André Jouvet1,2, Gilles Rotillon1 1EconomiX, University of Paris Ouest-Nanterre, Nanterre, France 2Climate Economics Chair, Paris, France Email: rotillon@u-paris10.fr Received October 1, 2011; revised December 12, 2011; accepted December 29, 2011 ABSTRACT Since the Kyoto Agreement, the idea of setting up pollution rights as an instrument of environmental policy for the re- duction of greenhouse gases has progressed significantly. But the crucial problem of allocating these permits in a man- ner acceptable to all countries is still unsolved. There is a general consensus that this should be done according to some proportional allocation rule, but opinions vary greatly about what would be the appropriate proportionality parameter. In this paper, we analyze the economic consequences of different allocation rules in a general equilibrium framework. We first show the existence and unicity of an international equilibrium under the assumption of perfect mobility of capital and we characterize this equilibrium according to the dotations of permits. Then, we compare the economic cones- quences of three types of allocation rules when the permit market is designed to reduce total pollution. We show that a rule which applies some form of grandfathering simply reduces production and emissions proportionally and efficiently. In contrast, an allocation rule proport