Arbeitspapier
Advancing Global Carbon Abatement with a Two-Tier Climate Club
A two-tier climate club exploits the comparative advantage of large countries to mete out punishments through trade, while taking their capacity to resist punishment as a constraint. Countries outside the coalition price carbon at a fixed fraction of the average carbon price adopted within the coalition, or face tariffs. Coalition countries abate more since doing so induces matching abatement elsewhere. If the rate at which noncoalition countries match coalition abatement goes to one, equilibrium abatement approximates the globally efficient outcome even though the coalition only internalizes damages within its borders. Even with a low match rate, the arrangement drastically reduces aggregate abatement costs. In contrast to a single-tier climate club in which many stable coalitions are possible, the stable coalition in the calibrated model is unique and consists of the US and the EU. Global abatement achieved by the stable agreement is about 40 percent of the efficient level.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 9831
- Classification
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Wirtschaft
Climate; Natural Disasters and Their Management; Global Warming
Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
Environmental Economics: Government Policy
Trade and Environment
International Agreements and Observance; International Organizations
Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Public Goods
- Subject
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international environmental agreement
climate club
trade sanctions
retaliation
incomplete participation costs
country-size heterogeneity
- Event
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Geistige Schöpfung
- (who)
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Iverson, Terrence
- Event
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Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
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2022
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Iverson, Terrence
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2022
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