Modelling climate policy

It is widely recognised that the coming into force of the Kyoto Protocol will be insufficient in achieving climate change control. Therefore, research on climate policy is focussing on the forthcoming negotiations on the policy architecture and abatement commitments that will be adopted after 2012. This paper adopts a game-theoretic approach to model climate policy and provides some results on the implications of alternative emission reduction targets beyond 2012. In particular, six scenarios are discussed and their impacts on the main economic variables are assessed. Most importantly, the paper will focus on the relationship between future emission targets and participation incentives, namely, it will examine whether there exist future emission targets that could be accepted by the US, China and other major emitters of greenhouse gases. Some suggestions for the design of future negotiation targets will also be put forward.