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Global climate change mitigation: Strategic incentives

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  • Sigit Perdana
  • Rod Tyers

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.

Suggested Citation

  • Sigit Perdana & Rod Tyers, 2018. "Global climate change mitigation: Strategic incentives," CAMA Working Papers 2018-10, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2018-10
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    2. Wang, Haifei & Guo, Ting & Tang, Qingliang, 2021. "The effect of national culture on corporate green proactivity," Journal of Business Research, Elsevier, vol. 131(C), pages 140-150.

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    Keywords

    Climate change; Carbon taxation; Global dynamic general equilibrium analysis;
    All these keywords.

    JEL classification:

    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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