Year: 2025
Type: dissertation
Abstract: International climate policy has developed considerably in recent decades, but international climate cooperation requires even more effective tools and means to slow down climate change. History has shown that countries’ interests regarding implementing effective climate actions have differed, which is why, for example, the goals set by international climate agreements have not been achieved. This thesis is a literature review that examines game-theoretic studies on linking emission markets. The main objective of the study is to analyse, based on different models and their results, whether broader linking of emission markets could be one way to enhance international climate cooperation. In addition, the purpose is to view, whether it would be good to take linking into account more widely in future climate agreements. The game-theoretic models viewed in the study aim to illustrate the strategic behaviour of countries in linked emission markets. Based on the literature, linking can improve the cost-effectiveness of emission reductions and overall welfare at both the individual country and global levels. In addition, broader linking of emission markets can serve as a significant tool in achieving emission reduction targets and promote cooperation between industrialised and developing countries. However, it should be noted that the results are open to interpretation, as differences can be observed in the results of the models presented in the study. A key problem in all the studies reviewed has been the notion that linking incentivizes strategic behaviour and countries to act on their own self-interest, which in turn can weaken the effectiveness of emission reduction measures.
Source: Aaltodoc (Aalto University)
Author: Leimu, Roosa
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7038648081