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The effectiveness of carbon markets in the reduction of emissions at minimal cost requires several conditions. In a dynamic context the inter-temporal dimension adds new conditions for the desirable performance of the market, and some tradeoffs. One tradeoff is related to the duration of permits. A long permit allows the private agent to optimize using a longer time horizon, but increases the risk associated with the initial allocation of the permits, for example the risk of generating market power. A short permit generates problems with the private agent’s planning horizon but allows the planner to correct initial misallocations, in particular in new markets or those that face important uncertainty. These issues are important in the implementation of these systems, especially in developing countries such as the Latin American ones studied in this paper.
This issue of IDEA covers some of the IDB’s recent research on climate change, including efforts on both the mitigation and adaptation fronts. That research includes both surprising findings and an underlying understanding that the region’s development must take into account -and will in many ways be shaped by- how it deals with this unique and inescapable issue. (View publication)
The general objective of this study is to review the international literature and best practices to develop a methodological framework capable of quantifying the increase in investments necessary for a traditional standard of living in a world subject to climate change. This methodology is then applied to two case studies: Bolivia and Chile. In particular, the document addresses the economics of a ... (View publication)
Climate change is imposing a large burden on the most vulnerable populations, particularly in the developing world. Establishing consistent causal relationships,however, is difficult because a multiplicity of climatic, economic and sociodemographic elements are combined to create the conditions for an outbreak of vector-borne disease. Based on a two-step procedure, this paper presents and tests a ... (View publication)
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