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International Environmental Agreements

, Volume 2, Issue 1, pp 23–48 | Cite as

Equity, international trade and climate policy

  • Claudia Kemfert
  • Richard S. J. Tol
Article

Abstract

The literature of welfare-maximising greenhouse gas emission reduction strategies pays remarkably little attention to equity. This paper introduces various ways to consider efficiency and equity simultaneously. Lower (higher) discount rates lead to higher (lower) emission reduction. Higher (lower) inequity aversion leads to higher (lower) emission abatement, unless one also considers the negative effects of OECD emission reduction on the exports of developing countries; in that case, the effect of inequity aversion is ambiguous. In the absence of international co-operation, higher (lower) risk aversion leads to lower (higher) emission abatement. With international co-operation, the effect of risk aversion is ambiguous because the higher risk aversion gives more weight to poorer regions and poorer generations. We analyse four ways to introduce compassion in a non-cooperative setting. If observed development aid is a guide, international altruism is small and has little impact on optimal emission control. If countries act as if they 'feel' but not 'physically experience' the climate impact of the most vulnerable country, optimal emission reduction increases, but not substantially so. However, if countries actually have to pay for the damage done, they would prefer to reduce their emissions to much lower levels. Finally, if countries pay as much for emission reduction as other countries suffer from climate change, (that is, if climate policy restores the income distribution to what it would have been without climate change), emissions are rapidly cut to very low levels.

altruism climate change climate economics efficiency equity greenhouse gas emission reduction inequity aversion Kant no-envy polluter pays principle Rawls risk aversion 

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Copyright information

© Kluwer Academic Publishers 2002

Authors and Affiliations

  • Claudia Kemfert
    • 1
  • Richard S. J. Tol
    • 2
    • 3
    • 4
  1. 1.SPEED, Department of EconomicsOldenburg UniversityOldenburgGermany
  2. 2.Centre for Marine and Climate StudiesHamburg UniversityGermany
  3. 3.Institute for Environmental StudiesVrije UniversiteitAmsterdamThe Netherlands
  4. 4.Center for Integrated Study of the Human Dimensions of Global ChangeCarnegie Mellon UniversityPittsburghUSA (Author for correspondence: E-mail

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