The Carbon-Budget Approach to Climate Stabilization: Cost-Effective Subglobal versus Global Action

Thomas Eichner and Rüdiger Pethig

No 3232, CESifo Working Paper Series from CESifo

Abstract: Scientific expertise suggests that mitigating extreme world-wide climate change damages requires avoiding increases in the world mean temperature exceeding 2◦ Celsius. To achieve the two degree target, the cumulated global emissions must not exceed some limit, the so-called global carbon budget. In a two-period two-country general equilibrium model with a finite stock of fossil fuels we compare the cooperative cost-effective policy with the unilateral cost-effective policy of restricting emissions to the global carbon budget. In its simplest form, the cost-effective global policy is shown to consist of a joint emission trading scheme in the first period (only). In sharp contrast, subglobal cost-effective regulation may require the abating country to tax its first-period consumption and to tax or subsidize its emissions in the first and/or second period.

Keywords: carbon emissions; carbon budget; cooperative; unilateral; cost-effective regulation (search for similar items in EconPapers)
JEL-codes: H21 H23 Q54 Q58 (search for similar items in EconPapers)
Date: 2010
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Working Paper: The carbon-budget approach to climate stabilization: Cost-effective subglobal versus global action (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3232

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