Abstract
This paper analyzes the cost-efficiency of trading CO2 emissions by focusing on the overall environmental impacts of active climate policy measures. When reducing CO2 emissions, other emissions, also related to the consumption of fossil fuels decrease at no additional cost. These secondary benefits must be taken into consideration when analyzing gains from international emissions trading. The Swedish environmental target to comply with the Kyoto Protocol by reducing greenhouse gases, and two national goals to alleviate acidification and eutrofication effects by reducing S02 and NOx pollutants are simultaneously studied in a CGE-modeling framework. The results indicate that when secondary benefits are taken into account, it may still be in the government's interest to nationally decrease CO2, instead of engaging in seemingly low-cost trading.