How Crucial is Cooperation in Mitigating World Climate? Analysis with World-MARKAL

In order to study the conditions for a World self-enforcing agreement on climate change, we model cooperative and non-cooperative World climate strategies with an integrated version of the 15-region techno-economic MARKAL model in which abatement costs and climate related damages are both included. We first explain why the use of a technology oriented model may add value to the analysis of global GHG strategies. Based on the empirical finding of linear cumulative climate damages, the computation of Nash equilibrium can be reduced to solving a series of 15 independent linear programs, one per region. Moreover, assuming interregional transfers to share the global surplus of cooperation, our work adopts the point of view of dynamic partial equilibrium computation coupled with cooperative game-theoretic principles. The results illustrate how the non-cooperative strategy is closer to the base case than to the cooperative strategy, and the amount of side-payments sufficient to guarantee the stability of the cooperative strategy are calculated with four different rules. The internal (in)stability of farsighted coalitions without transfers (non-cooperation) is also analyzed. The current project appears to be the first one of the sort using a large and detailed technology explicit model such as MARKAL.

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