Abstract
An international mechanism intended to curb global carbon dioxide emissions, mirrored after the Kyoto Protocol, is composed of decentralized regulatory and enforcement authorities and two supranational agencies that are in charge of promoting international transfers and imposing punitive fines. Regulatory enforcement is costly and imperfect. Polluting firms located in various sovereign nations may not comply with emission regulations. We show that there is a combination of decentralized emission quotas and centralized income transfers and fines, with decentralized leadership in policy making, which induces regional regulatory authorities to internalize all environmental and pecuniary externalities.
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Silva, E.C.D., Zhu, X. Global trading of carbon dioxide permits with noncompliant polluters. Int Tax Public Finance 15, 430–459 (2008). https://doi.org/10.1007/s10797-008-9074-z
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DOI: https://doi.org/10.1007/s10797-008-9074-z