How Global is the Solution to Global Warming?

This paper presents efficient CO2 abatement levels for 135 countries and identifies reasons for the absence of worldwide greenhouse gas emission reductions. Based on individual marginal cost and benefit functions for emission abatement we compare the Pareto-optimal Samuelson solution with the Nash equilibrium. We found that the Pareto-optimal solution would require status quo world emissions to be reduced by 26 percent whereas the Nash equilibrium would call for 20 percent emission reductions. Since only 6 percent of total emission reductions can be attributed to the global public goods effect the solution to the climate change problem cannot exclusively be seen in overcoming the freerider behavior. Moreover, we show that the probability for the development of international environmental agreements (IEA) is small. This again supports the argument that from an economic perspective more emphasis should be put on national policy measures rather than to wait for coordinated actions to be agreed on at international climate conferences.