III.4 Equity, Development and Climate Change Policy

Transcription

1 III.4 Equity, Development and Climate Change Policy Carlo Carraro * & Barbara Buchner Abstract This chapter explores the relationship between an equitable sharing of emission abatement targets between developed and developing countries and their incentives to participate in an international agreement to control climate change. Although developing countries face a drastic increase in their emissions, environmental efforts are not ranked among their priorities. The obvious explanation is their necessity to continue their development process, which is characterised by pressing needs other than emissions. For developing countries, the real problem is not emission reductions but economic growth. Therefore, the key question is whether there exists a climate strategy which guarantees both environmental effectiveness and an equitable sharing of emission burden, where equitable has the meaning of avoiding economic burdens on developing countries in order to support their economic development. The conjecture to be explored in this chapter is that the only way to accelerate the participation of developing countries in climate agreements -- and thus to come closer to the aim of a global climate control - - is to design equitable climate strategies which also support economic development. This chapter analyses different equitable climate strategies and their implications on developing countries incentives to cooperate on climate change control. 1. Introduction The cost-effectiveness of the Kyoto Protocol -- and of any treaty signed and ratified by a limited number of countries -- would be enhanced by attracting as many new countries as possible among the signatories, and by achieving these additions as soon as possible. In particular, in the case of climate change control, given the expected growth rate of income and population in developing countries, it would be crucial to induce these countries to commit themselves to greenhouse gas (GHG) emission control at some stage of their economic development (IPCC, 2001). However, as often emphasised in this study, the state of climate is a global public good and there are therefore strong incentives to free-ride on emission abatement. In addition, there is no supra-national authority that can impose environmental regulations, which implies that emission control can only be achieved through international negotiations and environmental treaties. Finally, structural differences among countries are very large. Developing countries are likely to suffer the greatest damage from climate changes, but are those which are least responsible for the present accumulation of GHGs in the atmosphere. This obviously raises an equity issue when countries negotiate on how to share the burden of combating climate change, with developing countries rejecting any proposals to commit to emission control. Fondazione Eni Enrico Mattei and University of Venice. Fondazione Eni Enrico Mattei. 1

2 CARRARO & BUCHNER Therefore, how can developing countries be induced to undertake substantial and effective action to control their GHG emissions? Developing countries currently have no emission abatement targets under the Kyoto Protocol. However, the implementation of the Protocol (or of other climate agreements) would have significant economic impacts on them, through trade and investment links, and through the clean development mechanism, which allows flexibility in the location of emission abatement activities. There is a bi-directional relationship between climate change policy on the one hand and equity and development on the other. Climate policy affects income distribution and growth at the world level, and therefore has implications on equity and development. At the same time, equity and development affects a country s decision to sign a climate treaty and therefore have implications on the effectiveness and efficiency of climate policy. The first side of this relationship -- the effect of climate policy on equity and development -- has already been studied in the recent empirical economic literature on climate change control (Cf. Babiker and Jacoby, 1999; Babiker, Reilly and Jacoby, 1999; Bernstein, et. al., 1999; Bernstein, Montgomery and Rutherford, 1999; Ellerman, Jacoby and Decaux, 1998). The main conclusions drawn in this literature can be summarised as follows: (i) the implementation of the Kyoto protocol negatively affects developing countries -- energy exporting countries above all -- particularly in the absence of emission trading; (ii) losses are smaller with Annex B trading and may become gains with global trading; (iii) economies in transitions belonging to Annex B, however, suffer relevant economic losses when emission trading becomes global. These results support the conclusion that climate policy generally reduces growth and welfare in developing countries. In addition, they also show that climate policy reduces equity, by inducing larger economic losses in developing countries than in developed ones. The second side of this relationship -- the effect of equity and development on climate policy -- has often been advocated as an important dimension of climate negotiations. For example, Metz (2000) argues that international equity will play a major role in implementing some of the most important elements of the Kyoto Protocol, whereas Convery (2000) states that an agreement in which the burden is equitably shared is more likely to be signed by a large number of countries. However, there are only a few studies containing an empirical assessment of the link between equity and the effectiveness of climate policy (Cf. McKibbin and Wilcoxen, 2000; Panayotou, Sachs and Peterson, 1999). This chapter provides new evidence, by explicitly adopting a gametheoretic framework, where countries incentives to sign an international treaty on climate change control are explicitly modelled. In particular, this chapter addresses the following research question: does more equity increase the probability that more developing countries adopt the Kyoto Protocol, thus enhancing the effectiveness of climate policy? The next section describes the modelling framework adopted to answer this question while section 3 is devoted to present the results of our optimisation exercises. A concluding section summarises our main results and their policy implications. 2. Some methodological aspects The background of the equity debate in mitigating the risks of global climate change can be found in the 1992 U.N. Framework Convention on Climate Change. Article 3 states that the Parties have to engage in the protection of the climate system with common but differentiated responsibilities. This phrase characterises the real beginning of the search for equity proposals, both in the international and intergenerational range. Since the debate about the adequacy of scope and timing of emission reduction commitments is still ongoing, it becomes more and 2

3 EQUITY, DEVELOPMENT AND CLIMATE CHANGE POLICY more obvious that the definition of fairness or equity in the context of climate change control is not a straightforward task. Different pre-conditions and characteristics of the countries, strong and diverse self-interests, incentives to free ride as well as the special features of climate change, render the approval and acceptance of equity criteria difficult. There exist a number of proposals regarding what could constitute equity in GHGs mitigation. Corresponding to the wide variety of equity principles, a range of possible burden-sharing rules emerged 1. As stated, there are many papers which discuss the importance of equity in climate change negotiations and which propose equity principles designed to enhance the probability that developing countries decide to commit themselves to GHG emission control (see, in addition to Convery, 2000 and Metz, 2000, Cazorla and Toman, 2000; Claussen and McNeilly, 1998; Rose and Stevens, 1993; Rose et al., 1998; Schmidt and Koschel, 1998; Tol, 2001). Equity proposals can be classified by distinguishing whether the applied equity criterion has been chosen according to the initial allocation of emissions ( allocation-based equity criteria), according to the final outcome of the implementation of the policy instruments ( outcome-based equity criteria) or according to the process by which the criterion has been chosen ( process-based equity criteria). 2 This analysis uses a game-theoretic framework to explore the consequences of the implementation of different outcome based equity criteria on the participation decision of developing countries. In particular, we analyse the consequences of the adoption of climate policy strategies which guarantee either one of the following three outcomes: (i) (ii) (iii) equal average ; equal per capita ; or equal per unit of GDP. The analysis is based on an empirical dynamic game which captures countries incentives to sign the Kyoto protocol. The model used is the well-known Nordhaus and Yang s (1996) RICE optimisation model. The RICE model is a one sector optimal growth model that has been extended to incorporate the interactions between economic activities and climate. One such model has been developed for each macro region into which the world is divided (USA, Japan, Europe, China, Former Soviet Union, and Rest of the World). Within each region a central planner chooses the optimal paths of fixed investment and emission abatement that maximise the present value of per capita consumption. Output (net of climate change) is used for investment and consumption and is produced according to a constant return Cobb-Douglas technology, which combines the inputs from capital and labour with the level of technology. Population (taken to be equal to full employment) and technology levels grow over time in an exogenous fashion, whereas capital accumulation is governed by the optimal rate of investment. There is a wedge between gross and net outputs (of climate change effects), the size of which is dependent upon the amount of abatement (rate of emission reduction) as well as the change in global temperature. The model is completed by three equations representing emissions (which are related to output and abatement), carbon cycle (which relates concentrations to emissions), and climate module (which relates the change in temperature relative to 1990 levels to carbon concentrations) respectively (see chapter III.2 for a more detailed description). 1 For further details see for example Cazorla and Toman (2000), Tol (2001), Rose and Stevens (1993), Rose, Stevens, Edmonds and Wise (1998) and Schmidt and Koschel (1998). 2 For further explanations regarding this distinction see, among others, Rose et al. (1998) and Schmidt and Koschel (1998). 3

4 CARRARO & BUCHNER For this analysis, we thus use the original RICE model without the modifications with respect to technological change that characterise the FEEM-RICE model described in previous chapters. The equilibrium concept is the one proposed in Eyckmans and Tulkens (1999). It is called PANE (Partial Agreement Nash Equilibrium) and can be interpreted as a special type of Nash equilibrium in which a coalition coordinates its policies taking as given the policy strategies of the free-riders who, in turn, are playing a non-cooperative Nash strategy against the coalition. 3 In our framework, the dynamic game in which countries set their policy variables (investment, emission abatement, and the demand for emission permits when trading is allowed) is preceded by a stage in which countries decide whether or not to sign the climate treaty which if signed will be implemented in the subsequent stages of the game. If a country does not sign the treaty, its policy variables will be set at their optimal levels given the decisions taken by the other countries (both signatories and non signatories). If a country does decide to sign the treaty, its policy variables maximise the joint welfare function of the signatories. An intermediate goal of our analysis is to identify the so-called self-enforcing agreements (Barrett, 1994). In addition, we will also single out which agreements are profitable and internally stable. The definitions of profitability and stability have been derived directly from Carraro and Siniscalco (1993) (see also Eyckmans (2001) and Weyant (1999) for recent applications to climate policy). We say that an agreement is weakly profitable if the sum of the individual payoffs of the signatories is larger than the sum of their payoffs when no agreement is signed. In this case, the agreement produces a surplus (overall benefits are larger than costs), but this surplus may not be profitable for all signatories, i.e. some countries may gain, others may lose. By contrast, an agreement is strongly profitable if the payoff of all signatories is larger when the agreement is signed and implemented than when no agreement is signed. Hence, each single participant obtains a net benefit from the agreement. We say that an agreement is internally stable if there is no incentive to free-ride, i.e. the payoff of each signatory is larger than the payoff he/she would obtain by defecting from the group of signatories. Finally, an agreement is self-enforcing or stable if there is no incentive to free ride and no incentive to join the group of signatories, i.e. the payoff to those countries that are not signatories is larger than the one they would achieve by signing the agreement. Notice that these four criteria are increasingly demanding. Stability implies internal stability which implies strong profitability which implies weak profitability (see Botteon and Carraro, 1997a). In particular, profitability is a necessary condition for stability. Also notice that a stable agreement is nothing more than a Nash equilibrium agreement (D Aspremont et al. 1983; Carraro and Moriconi, 1998). See the Appendix 2 of Chapter I.1 for a formal presentation of the above definitions and results. Following recent suggestions coming from the theoretical literature (Carraro, 1998), we do not only consider the possibility that countries agree on a single climate treaty, but we also allow countries to negotiate on different tables and to form different regional agreements (similarly to what happens in trade negotiations). Therefore, both single and multiple coalition structures will be analysed (see also Chapter I.3). In the case of multiple coalitions, the definition of stability is slightly more complex because agreements should also be intra-coalitionally stable (Yi, 1997). In other words, there should be no incentives to leave one coalition to join a different one. 3 Cf. Eykmans and Tulkens (1999), p.14. In this paper, the optimisation problem and the equilibrium concept are presented and the first order conditions are derived and discussed. 4

5 EQUITY, DEVELOPMENT AND CLIMATE CHANGE POLICY As a consequence, we will assess the profitability and stability of all possible coalition structures that can emerge on the basis of the three equity criteria mentioned above. Therefore, we can evaluate both the incentives to sign a Kyoto-type agreement (i.e. whether Annex B countries are willing to sign and ratify a climate agreement when the burden sharing is changed) and the incentives to sign any other climate agreements. The game is solved backward. The equilibrium of the first stage of the game is computed using Yi s (1997) partition function approach. Open membership is assumed. 4 A long term policy time horizon from 1990 to 2100 is assumed. Given that the Kyoto protocol does not specify emission targets beyond 2012, we assume that countries commit themselves to meet the existing targets also from 2012 onward (this is the so-called Kyoto forever scenario adopted in most of the literature on the economic costs of the Kyoto protocol; see, for example, Buonanno, Carraro and Galeotti, (2002) and Manne and Richels (1999); see also Chapter 8 of IPCC (2001), and the papers gathered in the collections edited by Carraro (1999, 2000)). 5 The ultimate goal of our analysis is to assess whether the implementation of the three aforementioned outcome based equity criteria increases the number of countries which participate in the climate agreement. To do this, we analyse the incentives for countries to sign a climate treaty both under the burden sharing implicit in the Kyoto forever scenario and under the burden sharing induced by the three outcome based equity criteria. To identify the burden sharing implicit in the Kyoto forever scenario we use an inverse optimisation approach (see e.g., Carraro, 1988, 1989, 1997), that is, we compute the weights in the joint welfare function in an iterative way until each region s optimal investment and abatement levels are such to yield the emission targets agreed in Kyoto. In this way, the solution of the maximisation process can replicate (i) the emission abatement levels for each Annex B country and (ii) the share of the born by Annex B and by Non-Annex B. The following section will present the insights gained by our empirical analysis. 3. Equity and Climate Change Control: some empirical evidence. In this section, the analysis of the profitability and stability of alternative coalition structures is carried out by using the three above-mentioned burden-sharing criteria which are different from the one implicit in the emission abatement targets agreed to in Kyoto. The goal is to check whether more equity induces more countries to sign a climate agreement, thus enhancing efficiency. The results of our optimisation experiments, where 203 different coalition structures have been examined for each burden-sharing criterion, are presented in Tables 1, 2, and 3. They can be summarised as follows: (i) All three outcome-based equity criteria increase the probability that a climate agreement yields a surplus. Indeed, the share of weakly profitable coalition structures is 4 A more detailed presentation of the theoretical framework and of the consequent empirical results is in Bosello et al. (2002). 5 The use of the Kyoto forever scenario may be seen a strong assumption. However, the CO2 concentration levels implicit in this assumption (if RICE is a good description of the world) coincide with those in the A1B scenario used by the International Panel on Climate Change (IPCC, 2001) which can be considered the median scenario among those currently proposed. 5

6 CARRARO & BUCHNER much larger with the three new equity criteria than with the burden-sharing rule implicit in the Kyoto forever scenario (see Table 1). Nevertheless, the possibility of multiple (regional) agreements does not improve the results: no multiple coalition structure is weakly profitable. (ii) (iii) (iv) The situation is less positive when the more restrictive criterion of strong profitability is used. Indeed, even the three equity criteria proposed above fail to guarantee a large number of strongly profitable coalition structures. Nonetheless, two of the proposed equity criteria imply that the share of strongly profitable coalition structures is larger than with the burden-sharing rule implicit in the Kyoto forever scenario (see Table 2). When the goal is strong profitability, multiple coalitions again do not provide an incentive structure better than the one provided by single coalitions. In addition, no coalition structure with multiple coalitions is internally stable (see Table 3). Hence, the only coalition structures which could be stable are the ones in which a single coalition forms. However, the share of single coalitions which are both strongly profitable and internally stable further decreases for all burden-sharing criteria (see Table 3 again). Again, only two equity criteria (equal per capita and equal per unit of GDP) show better results than the burden-sharing rule implicit in the Kyoto forever scenario. As a consequence, only very few coalition structures are likely to be stable, i.e. without any incentives to leave or to enter the coalition. Only one coalition is both profitable and stable, namely self-enforcing. This equilibrium coalition structure is formed by a coalition of three countries and by three free-riders. It can be obtained only if ex-ante all countries agree that abatement efforts must be such to equalise per capita. Summing up, the adoption of more equitable burden-sharing rules enhances the profitability of a climate agreement but not its stability, i.e. equity improves the distribution of costs and benefits but does not seem to be effective in offsetting the incentives to free-ride. 6

7 EQUITY, DEVELOPMENT AND CLIMATE CHANGE POLICY Table 1. Weak Profitability. Share of weakly profitable coalitions for each burden-sharing criterion. Kyoto forever implicit burden sharing Equal average Equal per capita Equal abatement costs per unit of GDP Single coalitions Multiple coalitions Total percentage of coalitions 1,7% 0 0,5% 29,3% 0 8,4% 32,8% 0 9,4% 32,8% 0 9,4% Table 2. Strong Profitability. Share of strongly profitable coalitions for each burden-sharing criterion. Kyoto forever implicit burden sharing Equal average Equal per capita Equal abatement costs per unit of GDP Single coalitions Multiple coalitions Total percentage of coalitions ,9% 0 2,0% 1,7% 0 0,5% 7

8 CARRARO & BUCHNER Table 3. Internal Stability. Share of internally stable coalitions for each burden-sharing criterion. Kyoto forever implicit burden sharing Equal average Equal per capita Equal abatement costs per unit of GDP Single coalitions Multiple coalitions Total percentage of coalitions ,4% 0 1,0% 1,7% 0 0,5% Two possible ways of addressing the problem are available. First, policy strategies could be designed to further redistribute the surplus provided by the cooperative behaviour within a coalition. This would increase the number of strongly profitable coalitions and hence the probabilities to identify a stable (i.e. self-enforcing) coalition structure. Transfer schemes designed to make a climate agreement profitable to all countries have been proposed for example in Chander and Tulkens (1997) and applied to climate models in Weyant (1999) or Eyckmans (2001). Second, policy strategies could be designed to redistribute the surplus achieved by internally stable coalitions with the goal to induce other countries to enter the coalition. In this chapter we focus on this second possibility. The first one - transfers to increase the number of strongly profitable coalitions was previously analysed in other papers (above all in Weyant, 1999, or in Eyckmans and Tulkens, 1999 and Yang, 2000, where a version of the RICE model is also used). The conditions for transfers to achieve the goal of expanding a coalition are presented in Carraro and Siniscalco (1993), Botteon and Carraro (1997a). Here we would like to stress that, at the equilibrium, (i) transfers are self-financed, i.e. countries are allowed to transfer only the surplus yielded by their cooperation. Hence, we analyse how strongly profitable coalitions can be broadened through a transfer mechanism; (ii) the transfer mechanism is Pareto optimal, i.e. all countries gain from using transfers to broaden the coalition. Given this latter restriction, the broadened coalition is also strongly profitable. However, self-financing implies that there may not be enough resources to offset the incentives to free-ride for all countries which are not in the initial coalition. In addition, even countries in the initial coalition may have an incentive to free-ride when other countries join. Hence, the transfer mechanism must also be such to offset these latter incentives to free-ride. To simplify the transfer mechanism, let us start from initial coalitions which are strongly profitable and internally stable. Is there a transfer mechanisms which induces other countries to join the coalition while offsetting all countries incentives to free-ride on the larger coalition? 8

9 EQUITY, DEVELOPMENT AND CLIMATE CHANGE POLICY Table 4 presents our results. The first column shows the initial coalitions for each of the three outcome based burden sharing criteria. The second column shows the largest internally stable coalition that can be achieved through a transfer mechanism starting from the corresponding initial, internally stable coalition. The transfer mechanism is the one described in Carraro and Botteon (1997a). Table 4. Internally stable coalitions before and after the use of transfers Internally stable coalitions without and with transfers Equalisation of average Internally stable coalitions before transfers Internally stable coalitions after transfers 0 0 Equalisation of abatement costs/gdp Equalisation of per capita USA + CHN EU + CHN + ROW JPN + FSU + ROW USA + CHN + ROW USA + EU + CHN + ROW USA + JPN + EU + FSU + ROW Our results can be summarised as follows: (i) (ii) No transfer mechanisms and burden sharing criteria (i.e. the three criteria that we considered) yield an incentive structure or enough resources to achieve the grand coalition, i.e. a global agreement on climate change. At least one region free rides on the agreement. The burden-sharing criteria that are most effective in guaranteeing the achievement of a large coalition without free-riding incentives are the equalisation of per capita and the equalisation of per unit of GDP. For example, with the former, a coalition formed by Japan, FSU and ROW can offset the free-riding incentives of EU and US. With the latter, a coalition formed by China and US can induce ROW to sign the climate agreement. Notice that the US needs a compensating transfer to enter a coalition which forms according to the criterion of equal per-capita, whereas they belong to the initially stable coalitions if the burdensharing criterion is equal per unit of GDP. This is quite intuitive: the US has high per capita emissions, but relatively small emissions per unit of GDP. Nonetheless, a stable global agreement cannot be achieved. Hence, we wonder whether the introduction of emission trading, regardless of the ex-ante burden-sharing criterion, can provide enough resources which, once transferred to free-riding countries, can induce them to sign the climate agreement. The answer to this question is positive: by solving the dynamic game, described previously, again, we find that regardless of the ex-ante burden sharing criterion (equity), and regardless of the initial, internally stable coalition, the equalisation of marginal, coupled with an appropriately designed ex-post transfer mechanism, can lead 9

10 CARRARO & BUCHNER to a grand coalition, i.e. a global climate agreement, signed by all countries or regions, which is stable. In other words, through emission trading and transfers, all internally stable coalitions can be broadened to achieve a stable grand coalition. By using a twofold transfer mechanism, one designed to transform a weakly profitable coalition into a strongly profitable one, and a second one designed to make it internally stable, we could obtain an even stronger conclusion. All weakly profitable coalitions can be broadened to achieve a stable grand coalition Conclusions The goal of this chapter was to provide a theoretical framework to analyse the widespread conjecture that a more equitable sharing of the costs of controlling GHG emissions would induce developing countries to sign a global climate treaty. In addition, this chapter used the proposed theoretical framework to check whether the above conjecture is supported by some empirical evidence. The conclusion is that, at least within the limits defined by the RICE model and by the three equity criteria considered in this chapter, cost-effectiveness (i.e. emission trading) seems to be more effective than equity in inducing more countries to join a climate coalition. In particular, whereas equity increases the profitability of a climate agreement, it does not offset the incentives to free-ride on emission abatement. These incentives can however be offset by appropriately designed transfers. Nevertheless, our results suggest that a better way to sustain a stable global agreement and thus to attract as many countries as possible to combat climate change is to couple emission trading, which provides additional financial resources to be transferred to non-signatories, with a transfer scheme specifically designed to offset incentives to free-ride. As a consequence, our results seem to suggest that an excessive focus on equity rules is not fruitful. Instead, the mentioned policy mix consisting of emissions trading with an appropriately designed transfer scheme appears to be a more effective strategy to tackle the global problem of climate change. The above results are obviously preliminary. Firstly, we compared only four burden-sharing criteria - the one implicit in the Kyoto agreement and three additional ones. Other criteria could obviously produce different results, even though the equity rules applied in this study encompass most of the empirical rules likely to be proposed. Secondly, and most importantly, all results crucially depend on the specification of the RICE model and on its way off assessing costs and benefits of emission abatement. It is well-known that the RICE model is a very useful but simplified representation of the economic system and that its environmental components are very limited. Therefore, it would be important to check whether our results are robust with respect to different model specifications. In particular, results are sensitive to the specification of the damage function and to the long-run dynamics of the model. A lower damage from climate change perceived in developing countries would reduce the benefits of GHGs emission control policies in these countries and therefore their incentives to join a coalition and to contribute to transfer schemes. The analysis of the links between equity and efficiency using other climate models is next in our research agenda. 6 This result is implicitly shown also in Chander and Tulkens (1995) but for a different definition of stability (usually named coalition unanimity. Cf. Yi, 1997). In particular, their definition of stability coincides with our definition of profitability. 10

11 EQUITY, DEVELOPMENT AND CLIMATE CHANGE POLICY References Barrett, S. (1992) Conventions on Climate Change: Economic Aspects of Negotiations, Paris: OECD. Barrett, S. (1994) Self-enforcing International Environmental Agreements, Oxford Economic Papers, 46, Barrett, S. (1997) Towards a Theory of International Co-operation, in C. Carraro and D. Siniscalco, eds., New Directions in the Economic Theory of the Environment, Cambridge University Press: Cambridge. Babiker, M. and H.D. Jacoby. (1999) Developing Country Effects of Kyoto-Type Emissions Restrictions. MIT Joint Program on the Science and Policy of Global Change, Report No. 53, Cambridge, MA. Babiker, M., J. Reilly and H.D. Jacoby. (1999) The Kyoto Protocol and Developing Countries. MIT Joint Program on the Science and Policy of Global Change, Report No. 56, Cambridge, MA. Bernstein, M., P. Bromley, J. Hagen, S. Hassell, R. Lempert, J. Munoz and D. Robalino. (1999) Developing Countries & Global Climate Change: Electric Power Options for Growth. Pew Center on Global Climate Change Bernstein, P., W. Montgomery and T. Rutherford. (1999) Global Impacts of the Kyoto Agreement: Results from the MS-MRT Model, Resource and Energy Economics 21, Bosello, F., Buchner, B., Carraro, C. and D. Raggi. (2002) Can Equity Enhance Efficiency? Some Lessons from Climate Negotiations, forthcoming in C. Carraro and V. Fragnelli, eds., Game Practice and the Environment, E.Elgar: Cheltenham. Botteon, M. and C. Carraro. (1997a) Burden-Sharing and Coalition Stability in Environmental Negotiations with Asymmetric Countries, in C. Carraro, ed., International Environmental Agreements: Strategic Policy Issues, E. Elgar, Cheltenham. Botteon, M. and C. Carraro. (1997b) Strategies for Environmental Negotiations: Issue Linkage with Heterogeneous Countries, in H. Folmer and N. Hanley, eds., Game Theory and the Global Environment, E. Elgar, Cheltenham. Buonanno, P., Carraro, C. and M. Galeotti. (2002) Endogenous Induced Technical Change and the Costs of Kyoto, FEEM Working Paper , Milan. Forthcoming in Resource and Energy Economics. Carraro, C. (1988) The Implicit Objective Function of Italian Macroeconomic Policy, Economic Modelling, n.3, Carraro, C. (1989) The Tastes of European Central Bankers, in M. De Cecco and A. Giovannini, eds., A European Central Bank? Perspectives on Monetary Unification after Ten Years of the EMS, Cambridge University Press, Cambridge. Carraro, C. (1997) Modelling International Policy Games: Lessons from European Monetary Coordination, Empirica, 23, Carraro, C. (1998) Beyond Kyoto: A Game-Theoretic Perspective, In Proceedings of the OCED Workshop on Climate Change and Economic Modelling: Background Analysis for the Kyoto Protocol, Paris, September 17-18,

12 CARRARO & BUCHNER Carraro, C. (ed.) (1999) International Environmental Agreements on Climate Change, Kluwer Academic Pub.: Dordrecht. Carraro, C. (ed.) (2000) Efficiency and Equity of Climate Change Policy, Kluwer Academic Publishers: Dordrecht. Carraro, C. and F. Moriconi. (1998) Endogenous Formation of Environmental Coalitions, presented at the Coalition Theory Network Workshop on Coalition Formation: Applications to Economic Issues, Venice, Carraro, C. and D. Siniscalco. (1992) The International Protection of the Environment, Journal of Public Economics, 52, Carraro, C. and D. Siniscalco. (1993) Strategies for the International Protection of the Environment, Journal of Public Economics, 52, Cazorla, M. and M. Toman. (2000) International Equity and Climate Change Policy, RFF Climate Issue Brief No. 27, Washington. Chander, P. and H. Tulkens. (1995) A Core-Theoretic Solution for the Design of Cooperative Agreements on Transfrontier Pollution, International Tax and Public Finance 2 (2), Chander, P. and H. Tulkens. (1997) The Core of an Economy with Multilateral Environmental Externalities, International Journal of Game Theory, 26, Claussen, E. and L. McNeilly. (1998) Equity and Global Climate Change: The Complex Elements of Global Fairness. Pew Center on Global Climate Change. Convery, F. J. (2000) Blueprints for a Climate Policy : Based on Selected Scientific Contributions, in C. Carraro, ed., Integrating Climate Policies in a European Environment, special issue of Integrated Assessment, Baltzer Pub. D Aspremont, C.A., A. Jacquemin, J.J. Gabszewicz and J. Weymark. (1983) On the Stability of Collusive Price Leadership, Canadian Journal of Economics, 16, D Aspremont, C.A. and J.J. Gabszewicz. (1986) On the Stability of Collusion, in G.F. Matthewson and J.E. Stiglitz, eds., New Developments in the Analysis of Market Structure, Mac Millan Press, New York, Ellerman, A.D., H.D. Jacoby and A. Decaux. (1998) The Effects on Developing Countries of the Kyoto Protocol and CO2 Emissions Trading. MIT Joint Program on the Science and Policy of Global Change, Report No. 41, Cambridge, MA. Eyckmans, J. (2001) On the Farsighted Stability of the Kyoto Protocol, Some Simulation Results, ETE Working Paper No , Katholieke Universiteit Leuven, University of Leuven. Eyckmans, J. and H. Tulkens. (1999) Simulating Coalitionally Stable Burden Sharing Agreements for the Climate Change Problem. Climneg Working Paper N. 18 and FEEM Working Paper Heal, G. (1994) The Formation of Environmental coalitions, in C. Carraro, ed., Trade, Innovation, Environment, Kluwer Academic Publishers: Dordrecht. Hoel, M. (1991) Global Environmental Problems: The Effects of Unilateral Actions Taken by One Country, Journal of Environmental Economics and Management, 20, 1, IPCC (2001) Third Assessment Report and Summary for Policymakers. Cambridge University Press: Cambridge. 12

13 EQUITY, DEVELOPMENT AND CLIMATE CHANGE POLICY Manne, A. and R. Richels. (1999) The Kyoto Protocol: A Cost-Effective Strategy for Meeting Environmental Objectives? in J. Weyant, ed., The Cost of the Kyoto Protocol: A Multi- Model Evaluation. Special Issue of the Energy Journal. McKibbin, W.J. and P.J. Wilcoxen. (2000) Designing a Realistic Climate Change Policy that includes Developing Countries. Australian National University and The Brookings Institution, University of Texas at Austin and The Brookings Institution. Metz, B. (2000) International Equity in Climate Change Policy, in C. Carraro, ed., Integrating Climate Policies in a European Environment, special issue of Integrated Assessment, Baltzer Pub. Nordhaus, W.D. and Z. Yang A Regional General-Equilibrium Model of Alternative Climate-Change Strategies. American Economic Review, Vol. 86, No. 4. Panayotou, T., J. Sachs and A. Peterson. (1999) Developing Countries and the Control of Climate Change: A Theoretical Perspectives and Policy Implications. CAER II Discussion Paper No. 44, Harvard Institute for International Development, Cambridge, MA. Rose, A., B. Stevens, J. Edmonds and M. Wise. (1998) International Equity and Differentiation in Global Warming Policy: An Application to Tradable Emission Permits, Environment and Resource Economics, 12(1): Rose, A. and B. Stevens. (1993) The Efficiency and Equity of Marketable Permits for CO2 Emissions, Resource and Energy Economics, 15(1): Schmidt, T.F.N. and H. Koschel. (1998) Climate Change Policy and Burden Sharing in the European Union Applying Alternative Equity Rules to a CGE-framework. ZEW Discussion Paper No Tol, R.S.J. (2001) Equitable Cost-Benefit Analysis of Climate Change Policies, Ecological Economics, 36 (2001): Weyant, J. (ed.). (1999) The Cost of the Kyoto Protocol: A Multi-Model Evaluation, Energy Journal, Special Issue. Yang, Z. (2000) Forming Coalitions in International Agreements on Global Climate Change, University of Pennsylvania. Yi, S. (1997) Stable Coalition Structures with Externalities, Games and Economic Behaviour, 20,