Global resilience to climate change: Examining global economic and environmental performance resulting from a global carbon dioxide market

In this study, we investigated global economic and environmental resilience in the presence of climate change. In particular, we examine the possibility of mitigating carbon dioxide (CO2) emissions without stressing standards of living. Here, we set up a cross-country CO2 market constrained by a quota, where CO2 is optimally re-allocated based on relative shadow prices of the pollutant. The objective is to stabilize global emissions without hindering global incomes and in the process achieve a single CO2 price. We introduce a re-allocation model that takes into account each country’s underlying polluting technology. The model solutions are then used to investigate whether a single, global price for CO2 is attainable. Our results suggest that global CO2 emissions could stabilize without stressing global incomes, with a global CO2 market achieving equilibrium. With a CO2 market, countries would then have the incentive to consider adopting, improving, or investing in additional abatement technologies to move beyond current capabilities, while continuing to increase standards of living.