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Sustainable Climate Treaties

Author

Listed:
  • Hans Gersbach
  • Noemi Hummel
  • Ralph Winkler

Abstract

We examine long-run treaties for mitigating climate change. Countries pay an initial fee into a global fund that is invested in long-run assets. In each period, part of the fund is distributed among the participating countries in relation to the emission reductions they have achieved in this period suitably rescaled by a weighting factor. We show that a suitably selected refunding scheme implements the globally optimal reductions of greenhouse gases in all periods as a unique subgame perfect equilibrium. The country-specific initial fees can be chosen to engineer a Pareto improvement and to ease participation. We also show that any planned abatement path as e.g. the one envisioned by the Paris Agreement in 2015 can be implemented by an appropriately chosen refunding scheme. Finally, we suggest ways for countries to raise money for the payment of initial fees that are neutral to tax payers and international capital markets.

Suggested Citation

  • Hans Gersbach & Noemi Hummel & Ralph Winkler, 2017. "Sustainable Climate Treaties," CESifo Working Paper Series 6385, CESifo.
    • Handle: RePEc:ces:ceswps:_6385
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    Cited by:

    1. Martimort, David & Sand-Zantman, Wilfried, 2011. "A Mechanism Design Approach to Climate Agreements," TSE Working Papers 11-251, Toulouse School of Economics (TSE), revised 30 Apr 2013.
    2. Gersbach, Hans & Hummel, Noemi, 2016. "A development-compatible refunding scheme for a climate treaty," Resource and Energy Economics, Elsevier, vol. 44(C), pages 139-168.
    3. Hans Gersbach & Noemi Hummel & Ralph Winkler, 2011. "Sustainable Climate Treaties," Diskussionsschriften dp1105, Universitaet Bern, Departement Volkswirtschaft.
    4. Sferra, Fabio & Tavoni, Massimo, 2013. "Endogenous Participation in a Partial Climate Agreement with Open Entry: A Numerical Assessment," Climate Change and Sustainable Development 156486, Fondazione Eni Enrico Mattei (FEEM).

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    More about this item

    Keywords

    climate change mitigation; refunding scheme; international agreements; sustainable treaty;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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