Abstract
Abstract We analyse incentives for, and the benefits of a possible international cooperation to reduce CO 2 -emissions. The negotiations are modelled as a reciprocal-externality game in CO 2 -emissions between 5 world regions. CO 2 -emissions affect the players in two ways: First, each country's income depends (via energy inputs) on the amount of CO 2 emitted. But emissions may also cause future damage due to climate change. The paper calculates illustrative estimates of the Nash equilibrium and the social optimum. It shows that the currently observed differences in countries' attitudes towards a CO 2 -reduction agreement can largely be explained by economic factors.
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