Emerging markets and climate change: Mexican standoff or low-carbon race?

Working Paper 46

Abstract

Schelling (1995) stressed the importance of correctly disaggregating the impacts of climate change to understand how individual interests differ across space and time. This paper considers equity implications at a level of disaggregation, which we consider insightful, but which is non-standard in the literature. We consider a “three-agent” model, comprising the G20 North, the G20 emerging markets (the GEMs), and the rest of the world (ROW), and consider their impact on emissions and temperature increases to 2100.

Using the MAGICC and RICE models, we calculate that simply stabilising emissions in GEMs would avoid about twice as much warming as an 80 per cent emissions reduction in the North.

We further show that decisions regarding the carbon intensity of economic development in the developing world are first order determinants of the likelihood of dangerous climate change in the coming century, and that early GEM participation in mitigation initiatives is essential if we are to safeguard the interests of the world’s most vulnerable.

Finally, we argue that though this three-handed strategic structure may lead to impasse, it may also stimulate a low-carbon race between nations.

David J. Frame and Cameron J. Hepburn