NZ economists are supposed to be gentle with each other – maybe that only holds in applied circles 😉

@Bob1

And what a beautiful day that will be 🙂

Agreed. Perhaps we could save institutional issues for another day.

Ah, sorry, I misinterpreted you there.

“I was standing up for the report – not attacking it”

I was unclear here. That was just an addendum as a general comment. it wasn’t directed at you. I think you’ve stuck up for NZIER most admirably 🙂

Even if that is the case, the analysis is not useless.

All it tell us is that there are institutional issues, and understanding the institutional issues apparent in this given market is important for policy analysis.

Their point was, if these issues had been solved, would a market outcome that makes emissions tradeable be cool – and it would.

In policy terms the institutional issue is important, but NZIER wasn’t trying to set up policy they were describing a part of the process. Criticising them for this would be ignoring the scope of their discussion.

“the additionality problems cannot be overcome”

This is an issue I would like to see discussed in more detail if we are actually going to move onto institutional structure.

“Did I ever say I wasn’t in favour of trading?”

No, which is why I said I thought you would agree. It wasn’t meant to be a snide remark, it was supposed to be a statement. Sadly it was difficult to translate tone through the interwebs 😀

“I’m sure that in a report they would have covered all this stuff, so I don’t think it’s fair to accuse them of ignoring it”

I didn’t so much accuse them of ignoring it as saying that it seemed like a fair issue to put to one side for what they were illustrating. I was standing up for the report – not attacking it 😛

I think it’s important to note that NZIER’s release isn’t a report, it’s just a two page note explaining the distinction between reductions and responsibilities for non-economists. I’m sure that in a report they would have covered all this stuff, so I don’t think it’s fair to accuse them of ignoring it. It is an interesting issue to discuss, though 🙂

@ben

In practical terms, this issue is important. It is an institutional problem. Personally I would lay the blame at the set up of international credit markets, and ultimately the implementation of the Kyoto protocol itself.

My feeling is that the NZIER report assumed a “better” institutional arrangement than currently exists to focus on the scope for market allocation. As long as we realise the institutional limits in this case this is still a very reasonable issue to look into – as I’m sure you would agree to Rauparaha 🙂

As Matt points out, this is a system problem not a problem with trade per se.

I think NZIER is right on the money: trading credits is essential to a climate change response – if gains from trade cannot be exploited on this issue then either the environment or welfare, or both, needlessly suffer.

I would be interested to see estimates of how large the impact is, though. So far I’ve only seen anecdotal evidence of shonky credits.