The value of international cooperation for abating global climate change

Because abatement of global climate change is a public good, independent national actions may not produce the efficient quantity. Using a numerical integrated-assessment model, abatement costs and damages induced by climate change are compared at the cooperative and noncooperative solutions to a set of two-party dynamic games between the industrialized and developing countries. Games with perfect and imperfect information about climate and economic factors are considered. Across 144 games with perfect information, incorporating different values of climate and economic parameters, the noncooperative solution usually yields global benefits comparable to those of the cooperative solution. In about one-fifth of these games, however, a second noncooperative solution exists which yields none of the benefits of the cooperative solution. In a game with imperfect information, where the state of nature is uncertain in the first but known in the second of two periods, the expected benefits of the noncooperative solution are 98% of the expected benefits of the cooperative solution. In contrast to single-agent studies which show little cost to delaying abatement, the benefits of cooperation are usually lost if cooperation is delayed 20 years.