Tradable Permits in Greenhouse Gas Emissions: A Macroeconomic Analysis in the North-South Context

Abstract

The paper presents an analytical macroeconomic model of NorthSouth interaction covering a scheme of tradable permits in greenhouse gas emission encompassing the two regions. The delineation between the fix-price North and the flex-price South is along traditional structuralist lines. A number of parameter changes are analyzed including transfers to and from the South, as well as changes in emission efficiency in the two regions. Transfers from North to South could induce the participation of the South in global schemes for environmental control, as well as be linked to improvements in the South's emission efficiency.