How global is the solution to global warming?

Abstract

This paper presents efficient CO 2 abatement levels for 135 countries and identifies reasons for the absence of worldwide greenhouse gas emission reductions. Based on individual marginal cost and benefit functions for emission abatement, the Pareto-optimal Samuelson solution is compared with the Nash equilibrium. It was found that the Pareto-optimal solution would require status quo world CO 2 emissions to be reduced by 28%, whereas the Nash equilibrium would require 21% emission reductions. Since only 7% of total emission reductions can be attributed to the global public goods effect, the solution to the climate change problem cannot exclusively be seen in overcoming the freerider behavior. Moreover, we show that the probability for the development of international environmental agreements (IEA) is small. This again supports the argument that from an economic perspective, more emphasis should be put on national policy measures rather than to wait for co-ordinated actions to be agreed on at international climate conferences.