Tiered Climate Clubs: Global Abatement Without Global Agreement | Terry Iverson 

Dr. Iverson is an environmental macroeconomist who uses applied theory to study issues in the economics of climate change. His recent work studies the challenge of increasing global carbon abatement in the absence of broad multilateral cooperation. He is a Professor at Colorado State University. 

Terry Iverson will present the paper ‘Tiered Climate Clubs: Global Abatement Without Global Agreement’.

Abstract

This paper introduces a novel policy structure to mitigate global carbon emissions without requiring broad multilateral cooperation. Extending Nordhaus’s (2015) climate club, countries in the ‘second tier’ must price carbon at a fixed fraction of the average carbon price within the first tier, or face tariffs. Tier 1 countries abate more since doing so induces matching abatement in the second tier. The stable first-tier coalition consists of the US and EU, which optimally sets carbon prices at 60% of the global Social Cost of Carbon. The stable agreement achieves global abatement four and a half times higher than the uncoordinated Nash equilibrium and one-third of the globally efficient level.

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