Global Climate Change Mitigation: Strategic Incentives

45 Pages Posted: 20 Feb 2018 Last revised: 26 Apr 2018

See all articles by Sigit Perdana

Sigit Perdana

The University of Western Australia - UWA Business School

Rod Tyers

Australian National University (ANU) - School of Economics; The University of Western Australia - Department of Economics

Date Written: February 18, 2018

Abstract

Central to global agreement on carbon emissions are strategic interactions amongst regions over carbon tax implementation and the benefits to be shared. These are re-examined in this paper, in which benefits from mitigation stem from a meta-analysis that links carbon concentration with region-specific measures of economic welfare. Implementation costs are then drawn from a highly disaggregated model of global economic performance. Multiplayer games are then constructed, the results from which are sensitive to embodied temperature scenarios and discount rates but robustly reveal that the US and China would be net gainers from unilateral implementation in net present value terms. The dominant strategy for all other countries is to free ride. Net gains to the three large economies are bolstered by universal adoption, which could be induced by affordable side payments. Yet the revealed downside is that net gains to all regions are negative for at least two decades, rendering commitment to abatement politically difficult.

Keywords: Climate change, Carbon taxation, Global dynamic general equilibrium analysis

JEL Classification: F47, F64, Q34, Q54

Suggested Citation

Perdana, Sigit and Tyers, Rod, Global Climate Change Mitigation: Strategic Incentives (February 18, 2018). CAMA Working Paper No. 10/2018, Available at SSRN: https://ssrn.com/abstract=3125904 or http://dx.doi.org/10.2139/ssrn.3125904

Sigit Perdana

The University of Western Australia - UWA Business School ( email )

Crawley, Western Australia 6009
Australia

Rod Tyers (Contact Author)

Australian National University (ANU) - School of Economics ( email )

Arndt Building
Australian National University
Canberra, Australian Capital Territory 0200
Australia
61-6-249-5124 (Fax)

The University of Western Australia - Department of Economics ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
61 8 6488 5632 (Phone)

HOME PAGE: http://www.business.uwa.edu.au/school/staff-profiles?type=profile&dn=cn%3DRodney%20Tyers%2Cou%3DEcon

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