We develop and estimate an integrated model of climate and the world economy to study international cooperation on net-zero carbon emission among sixteen geographic regions. We find that achieving net-zero emission by mid-century reduces global social welfare loss by up to 35%, accounting for the emission reduction cost. However, we show that the economic benefit of free-riding may entice each region to quit the cooperation at the early stage. We demonstrate that trigger strategies are not effective in stabilizing the cooperation and would quickly lead the world to the punishment phase. We also demonstrate that monetary transfers can improve the cooperation outcome but are not able to support net-zero emission. These results suggest that global effort on achieving net-zero carbon emission by mid-century is desirable, but the required international cooperation may be difficult to sustain.
We study strategic options by the use of solar radiation management (SRM) techniques. SRM has relatively inexpensive direct cost and has the potential to quickly control the global mean temperature increase. In this paper we identify and characterize opportunities and challenges that SRM brings to the climate change problem and its strategic impact on international co- operation of carbon emission reduction. This paper contributes to the expanding literature on studying SRM in strategic context by using an integrated climate-economic model, which makes our results informative for policy-makers.
In this paper, I study a piecewise linear dynamic climate game in which each country controls its own emission reduction policy. I formally characterize the globally optimal outcome and a simple subgame perfect equilibrium. I show that trigger strategies may improve the noncooperative outcome but its effectiveness may be compromised when participants climate change impacts are highly heterogenous. I also characterize the equilibrium outcome when a global market exists that allows participants to trade emission reduction burden with others.
This paper studies buyer’s optimal trading mechanism when the seller cannot commit to the auction mechanism in presence of new buyers if the preceding trading mechanism fails to achieve transaction.
This paper studies a discrete-time model of continuous double auction with one-sided offers. We extended the insights from the literature of sequential bilateral bargaining with one-sided information. We discovered that the successive skimming property is embedded in the equi- librium of our model. Through the analysis of a simple example of two traders on each side, we characterized the stationary equilibrium and provided a set of sufficient conditions for its existence.