Efficient emission reduction through joint implementation

Abstract

This paper models joint implementation (JI) for emission reduction between a developed and a developing country. When the per unit price of JI abatement is negotiated, the relative pay-offs deviate from the ratio of bargaining powers. When firms bargain, country-wise gains can increase with a greater abatement target. But if the governments bargain, the developing country's gains increase at the expense of the developed country as the target increases. However, the Pareto optimal JI can be achieved only when the governments negotiate over both abatement and transfer.