Permit Trading Under the Kyoto Protocol and Beyond

Peter J. Wilcoxen and Warwick J. McKibbin
Warwick McKibbin
Warwick J. McKibbin Former expert - Economic Studies, Center on Regulation and Markets, Distinguished Professor of Economics & Public Policy - Crawford School of Public Policy, The Australian National University

September 1, 1999


The Kyoto Protocol is seen by many as a step forward in reaching the UNFCCC goals of
slowing emissions of greenhouse gases. In this paper we argue that the issue of regime
sustainability in developing the Kyoto approach to climate change has received too little
attention. We question the sustainability of the Kyoto Protocol and suggest an alternative approach that is more politically and economically sustainable. We also present results from the G-Cubed multi-country model that demonstrate a permit trading system within the Kyoto Protocol offers large gains and improves the sustainability of the regime. We also propose a permit trading system as part of the solution to climate change policy however in a very different form to those currently being discussed.

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