In 2005, the EU introduced an emissions trading system in order to pursue its Kyoto obligations. This instrument gives emitters the flexibility to undertake reduction measures in the most cost-efficient way and mobilizes market forces for the protection of the earth's climate. In this paper, we analyse the effects of emissions trading in Europe, with some special reference to the case of Germany. We look at the value of the flexibility gained by trading compared to fixed quotas. The analysis will be undertaken with a modified version of the GTAP-E model using the latest GTAP version 6 data base. It is based on the national allocation plans as submitted to and approved by the EU. We find that, if the NAP is combined with a regional emissions trading scheme, then Germany, Great Britain, and Czech Republic are the main sellers of emissions permits, while Belgium, Denmark, Finland, and Sweden are the main buyers. The welfare gains from regional emissions trading -for the trading sectors only -are largest for Belgium, Denmark, and Great Britain; smaller for Finland, Sweden, and smallest for Germany and other regions. When we take into account the economy-wide and terms of trade effects of emissions trading, however, the (negative) terms of trade effects can offset the (positive) allocative efficiency gains for the cases of the Netherland and Italy, while all other regions ended up with positive net welfare gains. All regions, however, experienced positive increases in real GDP as a result of regional emissions trading. Acknowledgement

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in

No abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract. Global Warming Potential (GWP) is an index used to measure the relative accumulated radiative effect of a tonne of greenhouse gas (GHG) compared to that of a 'reference' gas (CO 2 ). Due to the different lifetimes of the GHGs, the GWPs are often measured over a fixed and long period of time (usually 20, 100, or 500 years). The disadvantage of this time-approach is that the index may give a good indication of the relative average effect of each GHG or total radiative forcing over the chosen time horizon, but it may not describe accurately the marginal contribution of each GHG to the overall climate change at a particular point in time, and conditional on a particular climate change policy scenario which is being considered. In this paper, we propose an alternative approach which measures the relative contribution of each GHG to total radiative forcing more accurately and in accordance with the current policy context being considered. We suggest the use of a marginal global warming potential (MGWP) rather than the existing (total or cumulative) GWP index. The MGWP can be calculated accurately and endogenously within a climate model. This is then linked to the marginal abatement cost (MAC) of the gas, estimated within an economic model linked to the climate model. In this way the balancing of the benefits and costs associated with the reduction of a unit of emission of the GHG can be achieved more accurately. We illustrate the use of the new approach in an illustrative experiment, using a multi-sector multi-gas and multi-regional computable general equilibrium economic model (GTAP-E) coupled with a reduced form climate change model (ICLIPS Climate Model, or ICM). The results show that the new approach can significantly improve on the existing method of measuring the trade-offs between different GHGs in their contribution to a climate change objective. Terms of use: Documents in2