Abstract
This paper explores issues of international cooperation in CO 2 emission control. We consider three cases: ‘selfish,’ in which region 1 controls optimally given its own damage costs and region 2 does not control; ‘altruistic,’ in which region 1 controls optimally given total worldwide damage costs while region 2 does not control; and ‘optimal,’ in which regions 1 and 2 exercise jointly optimal control of emissions and region 1 pays region 2 to participate. We find that neither region gains much in the selfish case; but both regions are better off in the optimal case than in the altruistic case, though region 1's benefits are negative in both these cases.
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