Sustainable Climate Treaties

40 Pages Posted: 23 Jun 2011  

Hans Gersbach

Swiss Federal Institute of Technology Zurich, (CER-ETH); IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Noemi Hummel

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Ralph Winkler

University of Bern - Department of Economics; University of Bern - Oeschger Centre for Climate Change Research

Multiple version iconThere are 2 versions of this paper

Date Written: June 23, 2011

Abstract

We examine a global refunding scheme for mitigating climate change. Countries pay an initial fee into a global fund that is invested in long-run assets. In each period, part of the fund is distributed among the participating countries in relation to the emission reductions they have achieved in this period. We identify two possible types of sustainable treaty. A first-best sustainable treaty involves varying amounts of refunded wealth and a minimal amount of initial fees inducing socially desirable abatement efforts in each period. In a second best sustainable treaty with only two parameters – optimally selected initial fees and constant refunds equal to the interest earned on the fund – the stock of greenhouse gases converges to the socially optimal stock. Finally, we suggest ways for countries to raise money for the payment of initial fees that are neutral to tax payers and international capital markets.

Keywords: climate change mitigation, refunding scheme, international agreements, sustainable treaty

JEL Classification: Q54, H23, H41

Suggested Citation

Gersbach, Hans and Hummel, Noemi and Winkler, Ralph, Sustainable Climate Treaties (June 23, 2011). Available at SSRN: https://ssrn.com/abstract=1870873 or http://dx.doi.org/10.2139/ssrn.1870873

Hans Gersbach (Contact Author)

Swiss Federal Institute of Technology Zurich, (CER-ETH) ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Noemi Hummel

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Ralph Winkler

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, 3001
Switzerland
+41 31 631 4508 (Phone)

HOME PAGE: http://www.ralph-winkler.de

University of Bern - Oeschger Centre for Climate Change Research ( email )

Zähringerstrasse 25
Bern, 3012
Switzerland

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