Can Sectoral Agreements and Output Based Allocation Address Leakage?


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The authors report that where leakage concerns are strong, voluntary sectoral agreements are unlikely to succeed. If sectoral agreements increase the confidence of market participants that CO2 prices will be internalised, then it can address many of the leakage effects.

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Author: Michael Colombier and Karsten Neuhoff
Year: 2007
Type: Final paper