The issue of devising an efficient and equitable global climate change mitigation agreement is examined. While there are strong damage cost reasons for self-interested, large countries to unilaterally move towards climate change mitigation there are practical reasons for them not to commit. A key issue for developed countries is that of possible carbon leakages while, for developing countries, the need to pursue growth objectives restricts their proclivity to mitigate. Carbon leakage issues can be addressed using such things as border tax adjustments which, however, raise computational complexity, GATT-rules consistency and, importantly for developing countries, equity issues. If the efficiency gains from utilising BTAs are to be realised, compensation schemes must also address the equity issues that bind practical policy-making in developing countries. The specific analysis is related to devising climate change agreements that include China and the United States.
I wrote this paper while being Visiting Scholar at Peking University. Continue reading Carbon Leakages, Climate Change ‘Free Riders’ and Copenhagen
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