Carbon Emission Allocation and Efficiency of EU Countries

Reduction of CO2 emissions is increasingly important among countries that want to protect the environment against global warming and climate change. This study examines two methods of CO2 emission reduction—CO2 emission allowance and an international agreement—by applying the Zero Sum Gains Model and the Cooperation and Alliance Model. We conclude that all DMUs reach 100% efficiency after trading on the CO2 emission allowance. The international agreement also improves the average efficiency of all DMUs, but its effect is inferior to the trading of the CO2 emission allowance.