Comparison of different climate regimes: the impact of broadening participation

Abstract

So-far, most climate mitigation studies look at climate policy strategies in a so-called first-best world, i.e. using the least expensive emission reduction options in all world regions and sectors. To explore the impact of limited participation of countries, we have run a set of scenarios that explore the impact of introducing a carbon tax in OECD, the BRIC countries (Brazil Russia, India and China) and the rest of the world. The results show that carbon taxes can effectively reduce greenhouse gas emissions. However, if low greenhouse gas concentration levels are to be achieved, early participation (in some form) of large developing countries is important to increase reduction potential. It should be noted that global carbon taxes (without additional assumptions) lead to relatively high costs in low-income regions. Cap-and-trade regimes have more flexibility to create a comparable distribution of costs amongst countries.Climate policy Global carbon tax Broadening participation