4 - A Globally Optimal Carbon Price Policy From Noncooperative Behavioral Standpoints

Abstract

This chapter provides, from behavioral and incentive standpoints, a full description of the carbon price (tax) policy, which has been the conceptual cornerstone of the economics and policy making of climate change. All the parameters, relationships, and outcome variables of the integrated assessment model known as the DICE/RICE (Dynamically/Regionally Integrated model of Climate and Economy) model are explained. Using the parameters and outcome variables from the modified DICE model, the author highlights diverging behavioral incentives and alterations of incentives under multiple policy scenarios: a business-as-usual policy, a globally optimal carbon price policy, and a negotiation policy with monetary transfers. The chapter unravels altered incentives from these scenarios and a strong incentive at the country level to be noncooperative at global warming policy negotiations.