The Role of Transaction Costs and Risk Premia in the Determination of Climate Change Policy Responses


Eckermann, Frauke ; Hunt, Alistair ; Stronzik, Marcus ; Taylor, Tim


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URL: http://ub-madoc.bib.uni-mannheim.de/143
URN: urn:nbn:de:bsz:180-madoc-1434
Document Type: Working paper
Year of publication: 2003
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D52 Q51 Q58 ,
Subject headings (SWD): Klima , Umweltpolitik
Abstract: Transaction costs and risk have generally not been taken into account in assessing the Kyoto mechanisms JI, CDM and emissions trading. However, they can have a significant influence. With regard to the project-based mechanisms, the factor that most determines the influence of transaction costs on the implementation of a project is the size of the particular project. For some projects transaction costs amount up to over 1000 ton C reduced, which proves the necessity of streamlining procedures, as recognised in the Marrakesh Accords. With regard to international emissions trading it will be of high importance to build on experience with past national emissions trading schemes in order to keep transaction costs low. However, international trading schemes of the type envisaged under the Kyoto Protocol are likely to have significant issues that have not been addressed in previous national experience. In addition to transaction costs, we determine country risk premia to account for the fact that projects in different states may induce different levels of risk of default or project failure.
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Eckermann, Frauke ; Hunt, Alistair ; Stronzik, Marcus ; Taylor, Tim (2003) The Role of Transaction Costs and Risk Premia in the Determination of Climate Change Policy Responses. Open Access [Working paper]
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