Efficiency, equity or disagreement? The economics of international carbon abatement negotiations

The current international effort to reduce greenhouse gas emissions, as embodied in the Framework Convention on Climate Change, is often criticized as inefficient by economists because it uses uniform targets instead of more theoretically efficient instruments such as international taxes. However, the effectiveness of any international treaty in producing environmental benefits is not wholly dependent on its economic efficiency but also on its political stability and the ability to accurately monitor and enforce its conditions. Stability depends on the magnitude and distribution of costs and benefits between countries which have heterogeneous economies, environmental damages, trading partners and abatement costs. The distribution of costs between countries will also depend on the type of policy instrument used to coordinate international abatement efforts. This paper analyses trade-offs that must be made when negotiating international agreements in order to balance the need for administrative convenience and economic efficiency with the realization that any agreement is better than no agreement