This book contains a synthesis of the results of the project "Climate Change Policy and Global Trade" financed by the European Commission under the Energy, Environment and Sustainable Development programme within the Fifth Framework Programme (Contract N EVK2-CT-2000-00093). The project aimed at providing quantitative insights into the impacts of two important international policy initiatives: (i) multilateral agreements on climate protection strategies, and (ii) trade agreements towards global trade liberalisation. Research in this project involved several institutions: Zentrum fur Europaische Wirtschaftsforschung, Mannheim (ZEW - Centre for European Economic Research, coordinator), ICCS of National Technical University of Athens (ICCSINTUA), Tinbergen Institute, Erasmus University Rotterdam (TI), Middlesex University Business School, London (MUBS), University of Rostock (UROS), and Metroeconomica Limited, Bath (MET). Nikolaos Christoforides (European Commission, DG Research) supervised the project and provided valuable input. We would like to thank him as well as Pierre Valette (DG Research) and Katri Kosonen (DG Taxation) for their helpful comments. The views expressed in this volume are those of the authors and do neither reflect the opinion ofthe Conunission nor ofits officials. Weare obliged to Frauke Eckermann for diligent and dedicative management assistance throughout the project. Furthermore, we would like to thank Andreas Pfeiff, Elisabeth Baier, Patrick Jochem, and Christoph Skupnik for assistance in putting together this book."

ZhongXiang Zhang (East-West Center, Honolulu) uses a global model based on marginal abatement cost curves for 12 world regions to estimate the contributions of the three flexibility mechanisms under the Kyoto Protocol, i. e. emissions trading, joint implementation, and the clean development mechanism. He shows how the reduction in compliance costs of industrialized regions depends on the extent to which the flexibility mechanisms will be available. Not surprisingly, the fewer the restrictions on the use of flexibility mechanisms will be, the greater the gains from their use. These gains are unevenly distributed, however, with industrialized regions that have the highest autarkic marginal abatement costs tending to benefit the most. Restrictions on the use of flexibility mechanisms not only reduce the potential of the industrialized regions' efficiency gains, but are also not beneficial to developing countries since they restrict the total financial flows to developing countries under the clean development mechanism. Christoph Bohringer (ZEW, Mannheim), Glenn W. Harrison (University of South Carolina, Columbia), and Thomas F. Rutherford (University of Colorado, Boulder) evaluate the welfare implications of alternative ways in which the EU could distribute its aggregate emission reduction commitment under the Kyoto Protocol across member states. Using a large-scale CGE model, they compare a uniform proportional cutback in emissions and the actual EU burden sharing agreement with an equitable allocation scheme derived from an endogenous burden sharing calculation. The latter equalizes the relative welfare cost across member states.