testing intertemporal budget constraints theory and applications to u s federal budget and current account deficits this paper extends previous tests of intertemporal budget balance and present value relationships by expanding the set of allowable deficit processes and by deriving a testable condition that is sufficient to ensure intertemporal budget balance as long as the expected discount rate is strictly positive using these tests the authors find that both the postwar federal budget deficit process and the process governing accumulation of u s assets by foreigners are consistent with intertemporal budget balance copyright 1991 by ohio state university press

sustainability of current account deficits in india an intertemporal perspective this study examines the sustainability of current account deficits cads and the validity of intertemporal budget constraint ibc in india the long run model is estimated on annual data for the period 1950 1951 to 2009 2010 the optimal single equation and maximum likelihood ml system estimates of the model provide a consistent support for the long run relationship between imports and exports the olsgh estimates provide no support and that ml system estimates a consistent support for cointegration in both the models estimated with one and two structural breaks in level the new cointegration breakdown tests generally suggest that the cointegration prevails from 1951 to 2010 the evidence supporting the cointegration between imports and exports overwhelms the evidence providing a mixed or no support for cointegration the estimates of slope parameter above zero and the dominant support for cointegration between imports and exports vindicate the validity of ibc and the sustainability of cads the shor

permit trading merely an efficiency neutral redistribution away from climate change victims in this paper we present a climate policy game with international emissions trading where governments first select their amounts of emissions permits these permits are transferred to firms and then traded competitively on an international market compared with a game without trading we find that the potential efficiency gains from permit trading which have been identified in other studies are totally undone if governments also employ a tax or subsidy on domestic emissions the only effect of permit trading in this case is a redistribution of income away from those most affected by climate change

induced innovation evolutionary theory and path dependence sources of technical change the i960s to the i98os were very productive of new theory and empirical insights into the sources of technical change in the i96os and i970s major attention focused on the implications of changes in demand and relative factor prices on the rate and direction of technical change in the late i 970s and early i980s attention shifted to evolutionary models inspired by a revival of interest in schumpeter s insights into the process of economic development since the early i98os these have been complemented by the development of historically grounded path dependent models of technical change each of these models has contributed substantial insight into the sources of technical change this paper was motivated by a perception that each of the three research agendas is approaching a dead end the three models induced evolutionary and path dependent represent elements of a more general theory that has not yet been invented ruttan 1996 a in a closing comment i suggest some steps toward the development of a more general theory of the sources of technical change

the sustainability of government deficits implications of the present value borrowing constraint this paper introduces a new methodology for evaluating the sustainability of fiscal policy the new methodology is distinguished from most existing tests in two important respects first it allows for stochastic real interest rates and second it is both necessary and sufficient results from the application of the new test suggest that recent fiscal policy in the united states has not been sustainable the paper contrasts its findings with those of james d hamilton and marjorie a flavin 1986 copyright 1989 by ohio state university press

harmonization of carbon taxes in international climate agreements the use of some kind of carbon tax is often proposed as part of an international climate policy one possibility could be an international climate agreement requiring a harmonization of domestic carbon taxes it is shown that there are several practical difficulties with such an agreement and that it therefore is unlikely that co2 emissions will be allocated efficiently between countries with this type of agreement alternative types of agreements include an international carbon tax in which the governments of the participating countries pay a tax in proportion to their co2 emissions to an international agency a very similar arrangement would be to introduce a system of emission permits which are internationally tradeable between governments under quite general conditions agreements of these two types can be designed so that they are both efficient and satisfy whatever distributional objectives one might have under both of these systems the choice of domestic policies could be left to the individual countries a domestic carbon tax is an obvious policy response from a country participating in an agreement of this type

climate policy under technology spillovers we study climate policy when there are technology spillovers between countries as there is no instrument that directly corrects for these externalities without an international climate agreement the non cooperative equilibrium depends on whether countries use tradable quotas or carbon taxes as their environmental policy instruments all countries are better off in the tax case than in the quota case two types of international climate agreements are then studied one is a kyoto type of agreement where each country is assigned a specific number of internationally tradable quotas in the second type of agreement a common carbon tax is used domestically in all countries none of the cases satisfy the conditions for the social optimum even if the quota price is equal to the pigovian level r d investments will be lower than what is socially optimal in the quota case it is also argued that the quota agreement gives higher r d expenditures and more abatement than the tax agreement

fiscal federalism approach for controlling global environmental pollution this paper finds that optimal international carbon taxes are country specific and we can decompose a tax on a domestically produced carbon intensive commodity into a revenue tax a tax to control local atmospheric pollution and an international carbon tax it shows that an institutional arrangement for the world economy similar to the fiscal federalism in the federal countries can be useful to internalize the global externalities of atmospheric pollution

the proposals for a european tax on co2 and their implications for intercountry distribution this paper analyzes the advantages andimplications of the implementation of aeuropean tax on carbon dioxide emissions as anown resource of the eu and it focuses on itseffects on intercountry distribution incontrast to a harmonized tax which would onlyhave distributive effects within each memberstate a tax collected at european scale wouldalso have important distributive effects amongdifferent countries these effects would alsodepend on the use of tax revenues the paperinvestigates through a simple empiricalanalysis the distributive effects among themember states of three tax models a pureco2 model a 50 50 energy co2model and a co2 model with a burden onnuclear power

aggregate implications of factor substitution in industrial processes abstract using a number of recently completed studies of the scope for factor substitution in industrial processes we estimate the total private benefits of systematic adoption cost minimizing technology as compared with capital intensive technology obstacles to the choice of such technology are examined and presented within a benefit cost framework the reasons for some of the current choices of technology are analyzed and policies necessary to alter these are suggested

are the heavily indebted countries solvent tests of intertemporal borrowing constraints abstract this paper investigates whether the heavily indebted countries hics in consideration of their external debt repayments remain solvent direct tests of the solvency condition derived from the usual intertemporal budget constraints shed light on the sustainability of their current policies the findings are twofold first the hics seem to have a debt overhang problem second in east and southeast asian countries except philippines the solvency conditions are satisfied these results give a rationale for the debt reduction plan a k a the brady plan and the empirical support of the debt overhang hypothesis

is the budget deficit too large yes specifically we find that recent spending and taxing policies of the government if continued violate the government s intertemporal budget constraint as a result government spending must be reduced and or tax revenues must be increased these conclusions are based on tests of whether government spending and revenue are cointegrated in addition to examining real spending and revenue we also normalize these variables by real gnp and population for a growing economy these normalized measures are perhaps more pertinent we also test and find support for the hypothesis that deficits have become a problem only in recent years

negotiating a uniform emissions tax in international environmental agreements abstract a consensus appears to be emerging that a global carbon tax is the best policy for managing greenhouse gas emissions emissions tax systems are relatively straightforward cost effective and can generate revenues used to offset other distortionary taxes moreover recent theoretical research weitzman 2014 has demonstrated that under some conditions the globally efficient tax rate can be implemented through a majority voting rule we extend this area of research by examining a uniform emissions tax system in the framework of an international environmental agreement in which only countries that voluntarily participate are subject to the tax we show that in the simplest situation in which countries have identical marginal benefit and cost functions the largest stable agreement consists of two countries and the tax system has little impact on abatement levels our analysis highlights that by ignoring the participation decision and assuming commitment by all parties the efficiency gains from a uniform emissions tax system are overstated

international environmental agreements with mixed strategies and investment abstract we modify a canonical participation game used to study international environmental agreements iea considering both mixed and pure strategies at the participation stage and including a prior cost reducing investment stage the use of mixed strategies at the participation stage reverses a familiar result and also reverses the policy implication of that result with mixed strategies equilibrium participation and welfare are higher in equilibria that involve higher investment

the relation between energy and non energy inputs in india s manufacturing industries the purpose of this paper is to examine the substitution possibilities among energy inputs and other non energy factors of production in response to price changes we relate this study to india s manufacturing industries this is of special interest since in the recent years indian industries have been gradually moving towards a high energy intensive structure of production in 1970 71 the mining and the manufacturing sector accounted for 52 9 per cent of the total commercial energy consumed in india in coal equivalent terms 8 p 1301 in this study we compute cross and own price elasticities of demand for all inputs a knowledge of the substitution possibilities is of paramount importance in economic planning consider for instance three situations first the effect of rising energy prices will tend to raise the demand for capital if capital and energy are substitute inputs second if energy and capital are complements the higher price for energy will tend to reduce the demand for both new capital equipment and energy thus the availability of cheap and ample supply of energy is significant in determining capital intensity and the future rates of capital formation in the literature on economic development this aspect of the choice of techniques has been by and large neglected third if there are limited substitution possibilities between energy and other inputs the adjustment by industry to higher prices of energy may be quite difficult and costs of production may rise precipitously necessitating a drastic change away from energy based production techniques in section ii of this paper we discuss the technique of analysis and describe the sources of data section iii presents the results and section iv is confined to the concluding remarks

on the limitations of government borrowing a framework for empiricaltesting this paper seeks to distinguish empirically between two views on the limitations of government borrowing according to one view nothing precludes the government from running a permanent budget deficit paying interest due on the growing debt load simply by issuing new debt an alternative perspective holds that creditors would be unwilling to purchase government debt unless the government made a credible commitment to balance its budget in present value terms we show that distinguishing between these possibilities is mathematically equivalent to testing whether a continuing currency inflation might be fueled by speculation alone or is instead driven solely by economic fundamentals empirical tests which have been developed for this economic question lead us to conclude that postwar u s deficits are largely consistent with the proposition that the government budget must be balanced in present value terms this abstract was borrowed from another version of this item

price and income elasticities of residential and industrial electricity demand in the european union this study examines the short and long run price and income elasticities of residential and industrial electricity demand in the european union between 1996 and 2016 instrumental variable models using the between estimator as well as dynamic panel models are employed to present robust estimates and to assess the impact of different methodologies on the reported elasticities the long run price elasticity of residential electricity consumption is estimated between 0 53 and 0 56 these elasticities are more inelastic than that of industrial electricity use which is reported between 0 75 and 1 01 the choice of different econometric methodologies has only moderate impact on the estimates while long run residential income elasticity estimates are moderately inelastic and estimated around 0 61 industrial electricity use tends to be closely tied to income with elasticities between 0 76 and 1 08 electricity demand in all sectors is highly price and income inelastic in the short run additionally population density temperatures and policy measures also influence sectoral electricity use the above estimates can aid the design of european energy and environmental policy

debt deficits and inflation an application to the public finances of india abstract the paper studies the solvency of the indian public sector and the eventual monetization and inflation that would be implied by stabilization of the debt gnp ratio in the absence of changes in the primary deficit the nonstationarity of the discounted public debt suggests that indefinite continuation of the pattern of behavior reflected in the historical time series process is inconsistent with the maintenance of solvency this message is reinforced by the recent behavior of the debt gnp ratio and of the ratio to gnp of the sum of the primary budget surplus and seigniorage our estimates of the base money demand function suggests that even maximal use of the inflation tax would not be sufficient to restore solvency measures to reduce the primary deficit are therefore unavoidable

optimal differentiation of international environmental taxes in the presence of national labor market distortions we explore the implication of the doubledividend debate for international environmentaltaxes in our scenario small open economies withdifferent labor market distortions follow a commonenvironmental policy and use national environmentaltax revenues to finance labor tax cuts since thedouble dividend hypothesis does not hold a high labortax implies a low environmental tax relative to othercountries the optimal differentiation ofinternational environmental taxes is proven to be afunction of the national labor tax rates and theuncompensated elasticities of labor supply

mitigating factors assessing the costs of reducing ghg emissions abstract the debate over the costs of ghg emission reduction has become more complex recently as disagreements over the existence of economic and environmental double dividends have been added to discussions over the existence of a negative cost potential we argue that basic assumptions about economic efficiency the sub optimality of the baseline and the rate of technical change are more important than model structure and we underline the importance of the timing of decisions for determining the costs moreover the use of a single baseline no policy scenario and several policy intervention scenarios may be fundamentally misleading in the longer term simply because the very idea of a business as usual scenario is deeply problematic ultimately the debate turns on political judgments about the desirability of alternative development paths

how to evaluate the solvency of an indebted nation reassessing third world debt daniel cohen the conventional measures of the solvency of developing countries usually rely on such indices as debt export or debt gnp ratios the underlying rationale is that to be solvent a country must eventually pay back all its debt this paper starts from two simple but important remarks first solvency need not require the full eventual repayment of all debt continued borrowing may be possible rather what is required is that a country s debt accumulation does not outstrip its capacity to make future repayments and the capacity of lenders to make future loans second solvency therefore cannot be defined independently of the growth rates of lender and borrower countries nor of the interest rate at which past debts accumulate putting these ideas together a new solvency index is proposed and this is computed for all the less developed countries this new index suggests a less gloomy view of the international debt crisis the largest debtors may have already accomplished an adjustment which is more than sufficient to restore their solvency when this is properly computed to investigate this claim there is a detailed analysis of the policies recently adopted in argentina and brazil

technologies energy systems and the timing of co2 emissions abatement an overview of economic issues abstract this paper provides an overview of economic issues involved in timing limitations on co2 emissions from energy systems it highlights issues relating to technology availability development and diffusion and the inertia of energy systems as being particularly important the paper sets this in the context of wider uncertainties surrounding the problem and briefly considers other aspects relevant to timing the paper is stimulated by the debate in the usa about optimal abatement paths in particular recent claims that it would be economically preferable to defer such abatement action in favour of measures that support technology development but do not affect emission trends for many years this paper categorizes the various economic issues involved and concludes that for each economic argument that has been advanced to justify deferring emission constraints there are counter vailing economic arguments that could be used in support of rapid near term emissions abatement rational policy lies between these extremes a policy of deferring all emissions abatement exposes economic systems and industries as well as the environment to significantly greater costs and risks than those arising from a more balanced approach furthermore the modelling studies that have been used to justify deferring emissions abatement do so because they embody the economic factors favourable to delay and largely neglect the countervailing issues to the point where their results have little relevance to the overall problem of timing emissions abatement

successful leadership in global public good provision incorporating behavioural approaches in the standard model of voluntary public good provision and other game theoretic models climate friendly leadership of a country is not successful a unilateral increase of this country s greenhouse gas abatement measures i e contributions to the global public good of climate protection will not lead to a positive reaction by the other countries but instead trigger a reduction of their abatement efforts and thus a crowding out effect in this paper it is shown how this undesired consequence need no longer occur when elements of behavioral economics are incorporated in the otherwise standard model of public good provision in particular strategic complementarities between the public good contribution of the leading country and those of the follower may result either if the follower has specific non egoistic or other regarding preferences or if the leader s contribution positively affects the follower s beliefs i e his conjectural variations about the leader s behaviour

technological progress and sustainable development what about the rebound effect abstract sustainability concepts that rest on the idea of resource or energy efficiency improvements due to technological progress tend to overestimate the potential saving effects because they frequently ignore the behavioral responses evoked by technological improvements efficiency improvements also affect the demand for resources and energy and often an increase in efficiency by 1 will cause a reduction in resource use that is far below 1 or sometimes it can even cause an increase in resource use this phenomenon is commonly labeled the rebound effect which is well known among energy economists but never attracted much attention in ecological economics the paper starts with the traditional neoclassical analysis of the rebound effect in a partial equilibrium framework that concentrates on the demand of one particular energy service such as mobility or room temperature it also provides an overview of some of the main empirical studies based on this model that mostly confirm the existence of the rebound effect but are controversial about its actual importance however we have to go beyond the neoclassical single service model in order to take care of the variety of possible feedback affecting energy use the paper presents two important expansions of the single service model in order to show the potential relevance of the rebound effect to ecological economics first it is shown that in a multi services model it proves to be difficult to make general statements about the relevance of the rebound effect in this case the overall effect of an increase in energy efficiency on total energy use depends on the on the assumptions about the substitutability between the services considered and the direction of the income effect second the paper also tries to take care of the fact that changes in resource use or energy use are frequently just side effects of other forms of technological progress especially technological change of a time saving nature can have a large influence on energy use as many time saving devices for example faster modes of transport require an increase in energy consumption that is frequently reinforced by a rebound effect with respect to time this effect will be especially strong when wages are high and at the same time energy prices are low as is currently the case in most industrialized countries consequently the paper also provides a strong argument for the introduction of energy taxes

the economics of changing course implications of adaptability and inertia for optimal climate policy this paper reviews evidence that energy technologies and systems adapt over time to accommodate external pressures that technical innovation and systemic change in the energy sector is largely induced by need and restrained by potentially large transitional costs a simple integrated model of optimal greenhouse gas abatement over time is presented in which the abatement cost depends on both fixed and transitional elements it is shown that the optimal current response and long run prospects differ radically between the classical economic case in which the cost of a given cutback in emissions is fixed exogenously and the adaptive case in which the response is ultimately adaptive but heavily constrained by inertia ie low fixed but high transitional cost if energy systems are indeed to a large degree adaptive the results demonstrate that as compared with the classical non adaptive case long run stabilization of atmospheric co2 may be optimal even with moderate damages from climate change greater near term abatement efforts are justified and the cost of a given delay in response may be several times higher neglect of the issue of induced technical change and other adaptive responses may invalidate the policy implications drawn from most integrated assessment models developed to date

accounting for technical progress in aggregate energy demand abstract researchers have not reached a consensus on how to account for technical progress when modeling aggregate energy demand some include a time trend in a dynamic model while others omit the trend in a model that disallows for long run income effects we show that the latter approach can be directly tested as a nested case of the former so that model selection need not be made a priori solely on theoretical grounds using annual data over 1960 1990 we find that long run income effects are not significant however including a time trend improves the model s fit while rendering much more credible long run price elasticities

energy prices substitution and optimal borrowing in the short run an analysis of adjustment in oil importing developing countries this paper builds a normative framework to evaluate three questions to what extent the increases in indebtedness of developing countries was excessive or simply the result of a perfectly rational strategy what borrowing strategies can be expected in the future as the developing countries revise their expectations about the length of time between shocks what is the derived demand to be faced by multilateral institutions providing some amount of concessionary credit the framework used here consists of a short term model traded and nontraded goods prices are flexible and the exchange rate is allowed to float an optimal borrowing rule is derived by maximizing a welfare function over the planning period that period defined by the expected number of years of oil price stability after the shock is short

bilateral or multilateral bargaining in the face of global environmental change this model deals with the problem of the greenhouse effect a problem of transfrontier pollution it consists of determining through the description of a bargaining process the conditions under which it is preferable for the developing countries to speak with a united voice and those conditions under which it is preferable for them to negotiate separately one from the other in particular it is shown that the agreements arising from the bargaining cannot be equitable and for that reason they include only a limited number of countries

financing vs forgiving a debt overhang abstract this paper examines the tradeoffs facing creditors of a country whose debt is large enough that the country cannot attract voluntary new lending if the country is unable to meet its debt service requirements out of current income the creditors have two choices they can finance the country lending at an expected loss in the hope that the country will eventually be able to repay its debt after all or they can forgive reducing the debt level to one that the country can repay the post 1983 debt strategy of the imf and the us has relied on financing but many current calls for debt reform call for forgiveness instead the paper shows that the choice between financing and forgiveness represents a tradeoff financing gives the creditors an option value if the country turns out to do relatively well creditors will not have written down their claims unnecessarily however the burden of debt distorts the country s incentives since the benefits of good performance go largely to creditors rather than itself the paper also shows that the tradeoff itself can be improved if both financing and forgiveness are made contingent on states of nature that the country cannot affect such as oil prices world interest rates etc

technological change in economic models of environmental policy a survey this paper provides an overview of the treatment of technological change in economic models of environmental policy numerous economic modeling studies have confirmed the sensitivity of mid and long run climate change mitigation cost and benefit projections to assumptions about technology costs in general technical progress is considered to be a noneconomic exogenous variable in global climate change modeling however there is overwhelming evidence that technological change is not an exogenous variable but to an important degree endogenous induced by needs and pressures hence some environmenteconomy models treat technological change as endogenous responding to socio economic variables three main elements in models of technological innovation are i corporate investment in research and development ii spillovers from r d and iii technology learning especially learning by doing the incorporation of induced technological change in different types of environmental economic models tends to reduce the costs of environmental policy accelerates abatement and may lead to positive spillover and negative leakage

input substitution in thailand s manufacturing sector implications for energy policy abstract input demand and substitution elasticities for five manufacturing sector industries in thailand are estimated using a three factor capital labour and energy translog cost function covering the first oil shock period 1974 1977 in all cases the demand is elastic for energy close to unity for labour and inelastic for capital capital and energy are always substitutes as are capital and labour the labour intensive and comparative advantage based industries showed greater responsiveness to energy price changes relative to the capital intensive and protected industries in the sense that the former two can substitute capital and labour for energy whereas the latter two can substitute only capital

global refunding and climate change abstract we design a global refunding scheme as a new international approach to address climate change participating in the global refunding system requires an initial payment it allows each country to set its carbon emission tax while aggregate tax revenues are partially refunded to member countries in proportion to the relative emission reductions they achieve within a given period the refunding scheme reduces the intertemporal climate change problem into a static public goods problem in a simple model we show that a suitably designed global refunding scheme achieves the social global optimum provided that all countries participate we discuss several procedures to achieve initial participation

a comparison of emission taxes and permit markets for controlling correlated externalities this paper provides an answer to the question are emission taxes an efficient and self enforcing mechanism to control correlated externality problems by correlated externalities we mean multiple pollutants that are jointly produced by a single source but cause differentiated regional and global externalities by self enforcing we mean a mechanism that accounts for the endogeneity that exists between competing jurisdictions in the setting of environmental policy within a federation of regions this mechanism incorporates sequential decision making among the jurisdictions and therefore determines an equilibrium based on the concept of subgame perfection we find that unlike joint domestic and international tradable permit markets joint emission taxes and a hybrid scheme of permits and taxes are neither efficient nor self enforcing

do governments in developing countries pursue sustainable debt policies empirical evidence for selected countries in africa and latin america in this paper we test for sustainability of public debt in selected low and middle income developing countries of africa and latin america we do this by analysing how the primary surplus to gdp reacts to variations in the debt to gdp ratio where we allow for a time varying reaction coefficient moreover we test for stationarity of the overall budget deficit of the selected countries the results show that despite rising debt ratios there is empirical evidence for some of the countries that public debt is sustainable independent of whether they belong to the low income or middle income group of countries

persistent deficits and the market value of government debt summary this paper investigates whether postwar canadian public financial policy satisfies a borrowing constraint direct tests of the present value relation suggested by this constraint shed light on the sustainability of current policy we examine monthly data on canadian federal government finances using tests for cointegration the finding is that the joint behaviour of real debt and real surpluses is inconsistent with intertemporal budget balance for the government one interpretation of this finding is that the government is systematically paying real returns to bondholders by issuing further debt alternatively bondholders may expect the government to finance future interest payments from a source other than primary surpluses e g the sale of physical assets much empirical macroeconomics is concerned with the effects of public financial policies numerous studies have examined whether such policies affect interest rates inflation or national income and its components these examinations raise the question of the efficacy of government budget deficits they generally assume that a borrowing constraint holds in the public finances some positive theories of public debt creation also make this assumption examples include barro s 1979 history of us federal deficits and sargent s 1986 rationalizations of recent us budgetary policy lucas and stokey s 1983 discussion of optimal taxation also involves this assumption hansen roberds and sargent 1987 outline the testable implications of present value budget balance and hamilton and flavin 1986 investigate the feasibility of recurring deficits by directly testing the us federal government s borrowing constraint such tests seem natural given both the recent boom is testing more complicated first order difference equations in macroeconomics and the widespread discussion of current deficits this paper tests the present value borrowing constraint using recently constructed data on the market value of outstanding canadian federal government debt we use monthly rather than annual as in hamilton and flavin data and conduct tests of univariate integration and of bivariate cointegration to investigate the joint time series properties of debt and deficits one finding is that real debt and real surpluses are integrated processes evidence of their cointegration is mixed and point estimates of the cointegrating vector suggest that the expected real rate of return on debt is negative moreover the surplus measured to include interest payments as government spending is nonstationary these findings are inconsistent

managing the international commons resource use and pollution control the simultaneous management in an international context of free access renewable resources and transboundary pollution is examined in a dynamic game framework first best outcomes under international cooperation are determined and compared to noncooperative outcomes when countries follow linear markov strategies an international policy consisting of taxes on emissions and harvesting with international redistribution of tax receipts is used to achieve the cooperative solution in addition side payments may be required to prevent free riding and thus make the international policy implementable

input substitution in manufacturing for three ldcs translog estimates and policy implications demand and subsititution elasticities from a translog cost model are estimated for the manufacturing sectors of india pakistan and bangladesh conventional formulae for the standard errors of the estimated elasticities are checked by a bootstrap experiment and their validity is confirmed for the moderate sized samples of india and pakistan the elasticity estimates indicate a high degree of substitutability among capital labour and energy resources in manufacturing sectors of these countries the result yields important policy implications for employment expansion through changing relative resource prices and the ability of these three economies to adjust to energy price shocks without serious impairment to economic growth

incentives to diffuse advanced abatement technology under the formation of international environmental agreements we analyse the incentives for polluting firms to diffuse and adopt advanced abatement technology in a framework in which governments negotiate an international environmental agreement these incentives crucially depend on whether the underlying environmental policy instrument is an emission tax or an emission quota the results for the international setting fundamentally differ from those for the national setting that have been elaborated upon in the earlier literature in particular equilibrium diffusion and adoption of advanced abatement technology are not necessarily optimal under the tax regime and may be even lower than those under the quota regime

an efficient mechanism to control correlated externalities redistributive transfers and the coexistence of regional and global pollution permit markets abstract we examine joint tradable permit markets as a self enforcing mechanism to control correlated externality problems by correlated we mean multiple pollutants that are jointly produced by a single source but which simultaneously cause differentiated regional and global externalities e g smog and global warming by self enforcing we mean a mechanism that accounts for the endogeneity that exists between competing jurisdictions in the setting of environmental policy within a federation of regions we find that joint domestic and international permit markets are pareto efficient for a wide class of preferences

project mechanisms and technology diffusion in climate policy the paper deals with the diffusion of ghg mitigation technologies in developing countries we develop a model where an abatement technology is progressively adopted by firms and we use it to compare the clean development mechanism cdm with a standard cap and trade scheme c t in the presence of learning spillovers we show that the cdm yields a higher social welfare than c t if the first adopter receives cdm credits whereas the followers do not the analysis leads us to suggest two cdm design improvements relaxing the additionality constraint for projects which generate significant learning externalities and allowing collective cdm projects which could internalize learning externalities