Using Bankruptcy Rules to Allocate CO2 Emission Permits.

The global growth of technologies and production affects the climate through emissions of greenhouse gases. The total amount of countries’ demands of CO2 emissions permits is higher than what the planet can sustain. This situation can be considered as a bankruptcy problem, where the sum of players’ claims exceeds the endowment of the resource. In this paper, we use an approach based on bankruptcy solutions (in particular, on the Weighted Constrained Equal Awards rule) in order to propose a more efficient and fair allocation protocol for sharing CO2 emissions permits among the EU-28 countries.