Equitable and efficient international schemes to control carbon dioxide emissions

We examine three non-cooperative 'global warming games' where carbon dioxide emissions and transfers are determined. An international agency implements transfers from rich to poor nations. In each game, the transfer mechanism obeys a predetermined equity principle-horizontal, proportional or 'green GNP'. Participation in each transfer scheme is voluntary. We find that implementable, horizontal, and proportional equity schemes are Pareto efficient. The green equity scheme, however, is generally inefficient. Unlike the others, our proposed proportional equity scheme is necessarily implementable - all nations always choose to participate. We conclude that proportional equity transfer schemes may be powerful instruments in controlling global warming.