Climate Change 2001:
Working Group III: Mitigation
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10.2.6 Global Agreements

The difficulty of achieving a global agreement on climate change underlined in the previous sections depends on four main factors:

Despite the warning that global agreements may be difficult to reach, many articles analyze the costs of agreements in which all countries participate, in one form or another (see, e.g., Capros, 1998, Ellerman et al., 1998; Manne and Richels, 1998; Shackleton, 1998; Bosello and Roson, 1999; Nordhaus and Boyer, 1999). The weakest form, discussed in Section 10.2.4, is that in which a few countries commit to emission reductions, but all accept trade emissions in a single international market. The strongest form is that in which a central planner is assumed to set optimal emissions levels for all world countries. This optimal solution is often proposed as a benchmark for actual negotiations and was often analyzed before Kyoto (see the collection of papers in Carraro (1999d)).

More interesting is the attempt made by Peck and Teisberg (1999) to model the negotiations between developed and developing countries to achieve a global agreement. This paper shows the potential for the achievement of co-operation to be achieved–the Pareto frontier is small, but not empty–but does not analyse the incentives to actually sign the agreement. However, the paper suggests a research direction that at least helps to identify the optimal emission reductions that are profitable for all negotiating countries.

The conclusions that can be derived from this type of empirical analyses are similar to those already mentioned for partial agreements. In the scenario in which baseline emissions are lower, it is easier to achieve a global agreement because lower emissions reductions are necessary (Barrett, 1997b) and consequently abatement costs are lower. Optimal emissions targets are such that they equalize marginal abatement costs. This optimal, cost-minimizing solution can also be achieved through an unconstrained emissions-trading system (Chander et al., 1999). Hence, either emissions targets are optimally set, or countries are allowed to trade emissions for any given set of targets through which a global consensus can be achieved. Of course, these two options have different impacts on equity. As shown by Bosello and Roson (1999), starting from the Kyoto targets, international unconstrained emissions trading among all countries achieves optimality, but reduces equity.

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