WHO SHOULD ABATE CARBON EMISSIONS - AN INTERNATIONAL VIEWPOINT

We review the optimal pattern of carbon emission abatements across cou ntries in a simple multi-country world. We model explicitly (with the model in Chichilnisky, 1993b) the fact that the atmosphere is a public good. Within this framework we establish conditions for it to be nece ssary for optimality that the marginal cost of abatement be the same i n all countries. These conditions are quite restrictive, and amount to either ignoring distributional issues between countries or operating within a framework within which lump-sum transfers can be made between countries. These results have implications for the use of tradeable e mission permits, which as normally advocated will lead to the equaliza tion of marginal abatement costs across countries. The observation tha t the atmosphere is a public good implies that we may need to look at a Lindahl equilibrium rather than a Walrasian equilibrium in tradeable permits.