Long-Run Implications for Developing Countries of Joint Implementation of Greenhouse Gas Mitigation

Joint Implementation (JI) calls for cooperation between industrialized and developing countries in the mitigation of greenhouse gas (GHG) emissions. However, a major concern of potential host countries is that, if they utilize their low-cost options for JI now, they will be left with only high cost options in the future, thereby penalizing them at a time when they may be obligated to mitigate GHGs themselves. This paper formalizes this hypothesis by utilizing an optimal control framework analogous to the Hotelling model of non-renewable resource extraction. The results are that cumulative abatement effects can impose costs on the future, but that they can be offset by technological change, market power, or compensation.