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Emerging markets and climate change: Mexican standoff or low-carbon race?

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  • David J. Frame
  • Cameron J. Hepburn

Abstract

Schelling (1995) stressed the importance of correctly disaggregating the impacts of climate change to understand how individual interests differ across space and time. This paper considers equity implications at a level of disaggregation which we consider insightful, but which is non-standard in the literature. We consider a �three-agent� model, comprising the G20 North, the G20 emerging markets (the GEMs), and the rest of the world (ROW), and consider their impact on emissions and temperature increases to 2100. Using the MAGICC and RICE models, we calculate that simply stabilising emissions in GEMs would avoid about twice as much warming as an 80% emissions reduction in the North. We further show that decisions regarding the carbon intensity of economic development in the developing world are first order determinants of the likelihood of dangerous climate change in the coming century, and that early GEM participation in mitigation initiatives is essential if we are to safeguard the interests of the world�s most vulnerable. Finally we argue that though this three-handed strategic structure may lead to impasse, it may also stimulate a low-carbon race between nations.

Suggested Citation

  • David J. Frame & Cameron J. Hepburn, 2011. "Emerging markets and climate change: Mexican standoff or low-carbon race?," GRI Working Papers 46, Grantham Research Institute on Climate Change and the Environment.
  • Handle: RePEc:lsg:lsgwps:wp46
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    File URL: http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2014/03/WP46_markets-climate-change-low-carbon.pdf
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    References listed on IDEAS

    as
    1. Du, Yang & Park, Albert & Wang, Sangui, 2005. "Migration and rural poverty in China," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 688-709, December.
    2. Schelling, Thomas C, 1995. "Intergenerational discounting," Energy Policy, Elsevier, vol. 23(4-5), pages 395-401.
    3. Dieter Helm, 2008. "Climate-change policy: why has so little been achieved?," Oxford Review of Economic Policy, Oxford University Press, vol. 24(2), pages 211-238, Summer.
    4. Broome, John, 2006. "Weighing Lives," OUP Catalogue, Oxford University Press, number 9780199297702.
    5. Wilfred Beckerman & Cameron Hepburn, 2007. "Ethics of the Discount Rate in the Stern Review on the Economics of Climate Change," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 8(1), pages 187-210, January.
    6. Nicholas Stern, 2008. "The Economics of Climate Change," American Economic Review, American Economic Association, vol. 98(2), pages 1-37, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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