What are the prospects for devising global agreements to mitigate climate change? I provide an analysis of policies involving developed and developing nations which accounts for external benefits and carbon leakages. Situations where mitigation effort should be concentrated in particular countries and where efficient outcomes can be fostered by international trade in emission permits are discussed. The possibility for using auxiliary policies to transform intractable incentive problems to more tractable strategic problems is explored. The role of commitments and the strategic implications of pursuing ‘no regrets’ and ‘adaptation’ policies are analysed. Dynamic and repeated game formulations are examined.
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