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EMF WP 12.2: The Value of Cooperation in Abating Climate Change

Climate change is usefully viewed as a long-term global commons problem. Because of the century-long atmospheric residence times of the major greenhouse gases (GHG’s), large thermal capacity of the world oceans, and multi-decade lifetimes of economic capital and technological systems, the effects of current activities on climate will persist for decades. Moreover, because the GHGs are well-mixed in the global atmosphere, the effects of anthropogenic emissions on climate do not depend on which nation emits them. Although a nation may bear all the costs of reducing its net GHG emissions, it cannot appropriate to itself all of the benefits; consequently, nations have inadequate incentives to reduce GHG emissions and greater-than-optimal emissions and climate change may ensue (Hardin 1968).

This paper provides insight into the significance of this commons aspect of climate-change decision making. Using an integrated assessment model to simulate the effects of near-term national decisions on the long-term costs of responding to climate change, it explores the economic and environmental outcomes associated with noncooperative and cooperative solutions. Quantitative assessment of welfare differences between solutions provides information about the potential magnitude of gains from near-term cooperation, as well as information about the possible distribution of gains among nations. Such information may be useful in developing effective measures for responding to the prospect of global climate change.