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Volume 7, Issue 2

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Valuing Equally the Environmental Goods in Rich and Poor Countries in a Post-Kyoto World

Osmani, Dritan

Year: 2013   Volume: 7   Issue: 2   Pages: 73-99

Abstract: The optimal pollution abatement levels are found by maximizing global social welfare in a permits trade system under the constraint that environmental goods are evaluated equally in rich and poor countries. Evaluating equally environmental goods in poor and rich countries makes possible to build a relation between the income elasticity of marginal utility e and the inequality aversion parameter gamma (Fankhauser et al. 1997; Johansson-Stenman 2000), which narrows the variation of e for a particular value of gamma. As a result, smaller variation for optimal abatement levels is obtained, which allows to inspect what Post-Kyoto abatement levels for poor and rich countries respect the requirement of evaluating equally the environmental goods in rich and poor countries. One finding is that in a Post-Kyoto world, the optimal abatement levels of poor countries are always different from zero, if we aim to evaluate equally the environmental goods in poor and rich countries. Furthermore, in a permits trade system, if we increase abatement levels continually, it can happen that poor countries have to carry out higher emission reductions than rich ones.

JEL classification: D61, D62, D63

Keywords: Cost-benefit analysis, distributional weights, global warming, welfare theory, integrated assessment modeling

RePEc: http://ideas.repec.org/a/fau/aucocz/au2013_073.html

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