The project aims at providing advice to European policy makers about the best strategy for climate change mitigation, within the framework of the Kyoto protocol and the provided flexibility instruments, focusing on the interrelationships with global trade agreements. Based on rigorous quantitative analysis with a General Equilibrium Model of the world economy, the study will investigate how trade agreements interfere with climate change mitigation policies. Interaction between various trade regimes and climate change policies will by quantified in terms of efficiency implications as well as distributional consequences at the regional and sectoral level. With respect to the use of the Kyoto flexible instruments the project will identify the optimal mix between domestic emission limitation actions in the OECD countries and foreign abatement action considering transaction costs and risk premia associated with capital transfers outside the OECD.

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