INCOMPLETE INTERNATIONAL CLIMATE AGREEMENTS - OPTIMAL CARBON TAXES, MARKET FAILURES AND WELFARE EFFECTS

This paper provides an empirical study of optimal carbon tares and wel fare effects under incomplete international climate agreements when th ere are market failures in the cooperating countries. The objective of the group of countries taking part in the international climate agree ment is to design carbon tares that maximize their aggregate net incom e, subject to a constraint on global CO2 emissions. We use a numerical energy model to study scenarios that differ with respect to types of CO2 taxes and countries taking part in the climate agreement. We also discuss the impact on regional net income following from different int ernational climate agreements.