INTERNATIONAL EQUITY AND DIFFERENTIATION IN GLOBAL WARMING POLICY - AN APPLICATION TO TRADEABLE EMISSION PERMITS

One of the major obstacles to reaching a comprehensive agreement on gl obal warming is the setting of greenhouse gas emission reduction targe ts for individual countries. Long-standing tensions between industrial ized and developing countries have raised the issue of equity in burde n-sharing. Moreover, individual industrialized nations have pleaded sp ecial circumstances and have sought differentiation in their obligatio ns. This paper analyzes alternative rules for distributing tradable ca rbon dioxide emissions permits. A non-linear programming model, which distinguishes between allocation-based and outcome-based rules, is use d to analyze the relative welfare outcomes. The model is applied to th e world body of nations and yields several important policy implicatio ns.