The Value of International Cooperation for Abating Global Climate Change

Abstract

Abatement of global climate change is modeled as a two-period game between the industrialized "North" and developing "South." Using an integrated-assessment model to simulate the economic and environmental consequences of alternative abatement policies, cooperative and Nash solutions are identified. Across a wide variety of games, incorporating alternative values of physical and economic parameters, the Nash solution achieves most of the benefits of the cooperative solution, relative to the case where neither region acts to abate climate change. Similarly, when parameter values are uncertain in the first period (1990- 2010) but become known by the second period (2010-2100), the Nash solution achieves most of the benefits of global cooperation. In contrast to the results of globally aggregated analysis, in which a 20-year delay in abatement imposes small costs, most of the benefits of cooperation are lost if the regions delay cooperation until the second period.

JEL Classification: C72, H41, Q28