Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/171589 
Year of Publication: 
2011
Series/Report no.: 
Economics Working Paper Series No. 11/146
Publisher: 
ETH Zurich, CER-ETH - Center of Economic Research, Zurich
Abstract: 
We examine a global refunding scheme 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. We identify two possible types of sustainable treaty. A first-best sustainable treaty involves varying amounts of refunded wealth and a minimal amount of initial fees inducing socially desirable abatement efforts in each period. In a secondbest sustainable treaty with only two parameters – optimally selected initial fees and constant refunds equal to the interest earned on the fund – the stock of greenhouse gases converges to the socially optimal stock. 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
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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