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Symposium 2010

Solution for Climate Change and Economic Development

The Challenge

Climate change poses the serious challenge of carbon dioxide emission reduction. Emission control by developing countries is becoming a key for effective mitigation of climate change, as those count ...

Climate change poses the serious challenge of carbon dioxide emission reduction. Emission control by developing countries is becoming a key for effective mitigation of climate change, as those countries now account for more than a half of global emissions and are still expanding their energy infrastructure.

Develop contingent pricing solutions.

A contingent treaty would specify that a country should reduce carbon emissions by a set amount and offer the country a menu of choices ranging from high reductions (with corresponding high compensation) to low reductions (with low compensation). After signing such a treaty, the country would select the option that best suits it.

By making use of the theory of mechanism design, such a treaty could be designed so that a given country would choose the reduction level it would have been assigned had reduction costs been publicly known. Thus, in receiving appropriate rewards in the form of trade concessions and technology transfers, developing countries may also participate in reducing greenhouse gas emissions.

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