Analysis on bargaining about global climate change mitigation in international aviation sector

Understanding the basic interaction mechanism among nations surrounding the CO2 emissions is critically important for the policy formulation analysis in aviation sector at present, especially for market-based measures such as emission allowance trading. We performed simulation analysis of the effects on pricing of emission allowances by including major players such as China and India into the hypothetical global CO2 emission trading scheme according to non-cooperative game framework. In the presence of a negative public good, i.e., CO2, we extended the Lindahl–Bowen–Samuelson condition to include a class of uncertainty typical in climate change policy into utility. By using the result, we explained, with some numerical examples, the welfare effects caused by the changes of factors, such as level of uncertainty, degree of risk averse, asymmetric utility structure, initial allocation among players, based on our model surrounding the bargaining of CO2 emissions allocation games.