Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/161824 
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper No. 6385
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We examine long-run treaties for mitigating climate change. Countries pay an initial fee into a global fund that is invested in long-run assets. In each period, part of the fund is distributed among the participating countries in relation to the emission reductions they have achieved in this period suitably rescaled by a weighting factor. We show that a suitably selected refunding scheme implements the globally optimal reductions of greenhouse gases in all periods as a unique subgame perfect equilibrium. The country-specific initial fees can be chosen to engineer a Pareto improvement and to ease participation. We also show that any planned abatement path as e.g. the one envisioned by the Paris Agreement in 2015 can be implemented by an appropriately chosen refunding scheme. Finally, we suggest ways for countries to raise money for the payment of initial fees that are neutral to tax payers and international capital markets.
Subjects: 
climate change mitigation
refunding scheme
international agreements
sustainable treaty
JEL: 
Q54
H23
H41
Document Type: 
Working Paper
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