Joint Implementation under the Second Sulfur Protocol: Analysis and Simulation

The purpose of the paper is to analyze the possibility of introducing a system of transferable discharge permits (TDP) to develop the joint implementation procedure conceived in the Second Sulfur Protocol. The analysis is performed considering not only the European countries that have agreed emission reductions in the Protocol, but also a group of non-signing countries that could possibly abate their emissions and alleviate the reduction burden agreed by the former, presumably receiving certain compensation from them in return. The theoretic elements of the system are analyzed and then a simulation software – the program ATLAS – is developed and applied to study the effects of choosing among the possible implementation parameters. In contrast to other simulation programs developed with a similar aim, ATLAS can simulate multilateral permit trades, which are closer than bilateral ones to the concept of joint implementation conceived in the Protocol. The use of this program anticipates that the amount of feasible and profitable transfers would be much higher if a set of European countries which are not Parties to the Protocol were allowed to take part in the system as permit sellers. Copyright Kluwer Academic Publishers 1999