Welfare Gains under Tradable CO2 Permits

  • Larry Karp
  • Xuemei Liu
Part of the Natural Resource Management and Policy book series (NRMP, volume 20)


It is easy to understand the opposition to liberalized trade in established markets: Domestic producers lose from increased foreign competition. It is harder to understand the opposition to creating markets, including international markets, where they currently do not exist. Many economists and policymakers have proposed establishing tradable carbon permits to decrease the cost of reducing global carbon emissions. Since, as of 2001, there are no enforceable ceilings on emissions, the right to emit carbon has no market value. Emissions permits are not commodities. The usual forces that oppose market liberalization are obviously not present in this (proposed) market.


Gross Domestic Product Ordinary Little Square Equilibrium Price Welfare Gain Environmental Kuznets Curve 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Bohm, P. and B. Larsen. 1994. “Fairness in a Tradable-permit Treaty for Carbon Emissions Reductions in Europe and the Former Soviet Union.” Environmental and Resource Economics 4(3): 219–239.CrossRefGoogle Scholar
  2. Buenos Aires Press Kit. 1998. Fourth Session of the Conference of the Parties U.N. Framework Convention on Climate Change. Internet website:
  3. Gardner, T. and F. Joutz. 1996. “Economic Growth, Energy Prices and Technological Innovation.” Southern Economic Journal 62(3): 653–666.CrossRefGoogle Scholar
  4. Karp, L. and X. Liu. 1999. “Valuing Tradable CO2 Permits and OECD Countries.” Working Paper No. 872, Department of Agricultural and Resource Economics, University of California, Berkeley.Google Scholar
  5. Larsen, B. and A. Shah. 1994. “Global Tradable Carbon Permits, Participation Incentives, and Transfers.” Oxford Economic Papers 46: 841–856.Google Scholar
  6. Nonneman, W. and P. Vanhoudt. 1996. “A Further Augmentation of the Solow Model and the Empirics of Economic Growth for OECD Countries.” Quarterly Journal of Economics 111(3): 943–953.CrossRefGoogle Scholar
  7. Nordhaus, W.D. 1991. “The Cost of Slowing Climate Change: A Survey.” The Energy Journal 12(1): 37–64.CrossRefGoogle Scholar
  8. Roberts, J.T. and P. Grimes. 1997. “Carbon Intensity and Economic Development 1962–91: A Brief Exploration of the Environmental Kuznets Curve.” World Development 25(2): 191–198.CrossRefGoogle Scholar
  9. Stavins, R. 1998. “What Can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading.” Journal of Economic Perspectives 12(3): 69–88.CrossRefGoogle Scholar
  10. World Bank. 1998. World Bank World Development Indicator, 1998. CD-Rom.Google Scholar

Copyright information

© Springer Science+Business Media New York 2002

Authors and Affiliations

  • Larry Karp
    • 1
  • Xuemei Liu
    • 1
  1. 1.University of CaliforniaBerkeleyUSA

Personalised recommendations