Template-Type: ReDIF-Article 1.0
Author-Name:  Peter Cramton
Author-Name:  Steven Stoft
Title:  Global Climate Games: How Pricing and a Green Fund Foster Cooperation
Classification-JEL: F0
Pages:  
Volume:  Volume 1
Issue:  Number 2
Year:  2012
Abstract:  The most efficient global climate policy is to price carbon. The Kyoto-Copenhagen agenda was intended to do this with a system of international cap and trade. We view these negotiations as a game in which countries choose their quantity targets based on self interest. Like the analogous public-goods game, in which countries choose their abatement levels, we find this game leads to uncooperative behavior and suggest that this is why the Kyoto approach inevitably failed.  By contrast, a game in which all countries vote for a global quantity target or a global price target can lead to a highly cooperative choice of target. However, the assignment of responsibilities for a global quantity target stymies implementation of a global cap. The global-price-target game largely overcomes this barrier, because a uniform global price providesafocalpointforcooperation.Howeverlow-emission countries apparently prefer a much lower global-price than more prosperous countries unless a Green Fund is implemented. A game that couples such a fund to the global price target can largely overcome this barrier to cooperation. We describe such a game along with its equilibrium outcome, which promises to be inexpensive and cooperative. 
Handle: RePEc:aen:eeepjl:1_2_a09
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