Who should abate carbon emissions? an international viewpoint

We review the optimal pattern of carbon emission abate¬ments across countries in a simple multi-country world. We model explicitly (with the model in Chichilnisky [4]) the fact that the atmosphere is a public good. Within this framework we establish conditions for it to be necessary for optimality that the marginal cost of abatement be the same in all countries. These condition are quite restrictive, and amount to either ignoring distribu¬tional issues between countries or operating within a framework within which lump-sum transfers can be made between countries. These results have impli¬cations for the use of tradeable emission permits, which as normally advocated will lead to the equalization of marginal abatement costs across countries. The observation that the atmosphere is a public good implies that we may need to look at a Lindahl equilibrium rather than a Walrasian equilibrium in tradeable permits.