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Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Ilya Stepanov
Efficiency Assessment of Economic Mechanisms Regulating Greenhouse Gas Emissions
World Economy
(Master’s programme)
2016
Economic mechanisms are gaining importance in different countries’ environmental policies. The most famous are price for pollution (tax or subsidy) and cap & trade system with either absolute or relative cap on emissions (dependent on economic output). Economic efficiency plays a role of the main criterion for the mechanisms comparison.

The assessment of the economic efficiency of the mechanisms to regulate greenhouse gases is critical under conditions of uncertainty about future economic development. Difficulties of prediction the dynamics of greenhouse gas emissions along with lack of knowledge about future technologies make it hard to determine the costs associated with emissions reduction.

The implications of the model built in this paper for Russia are limited due to specification of the model (parameters restriction) as well as undeveloped institutions and environmental law in the country. However, it can be useful in terms of depicting logics of economic mechanisms and describing change in comparative advantage of one mechanism over another in the context of social welfare maximization. Theoretically, comparative advantage of carbon tax and cap & trade with absolute cap over cap & trade with relative cap will growth with Russian technological development and gradual reduction of greenhouse gas emissions.

Meanwhile, the choice of the optimal mechanism of the environmental policy in Russia should be determined by the range of additional factors but economic efficiency owning to weak institutions and undeveloped law system for environmental regulation. Primarily, these factors are: potential impact of carbon regulation on priority economic sectors and industries, long-term effect of mechanisms application and etc.

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