Climate policy targets in emerging and industrialized economies: the influence of technological differences, environmental preferences and propensity to save

Abstract

Although emerging economies claim that industrialized countries need to reduce their carbon emissions first, stabilization of the future global climate system requires immediate action by all countries. In a stylized two-country intertemporal general equilibrium model, we derive welfare maximizing emission caps in emerging and industrialized countries, taking account of country differences in technology, environmental preferences and propensity to save. Simultaneous target setting is compared to a sequential one in which the industrialized country commits itself to binding targets first. In the latter case, when the industrialized economy has stronger environmental preferences and a lower relative pollution production share, the industrialized economy can increase its joint economic and environmental welfare by setting a laxer target. On the other hand, when the emerging economy has considerably higher environmental preferences, our results suggest that the industrialized economy will choose a more restrictive target in a sequential setting than in a simultaneous one, contrary to first thought that a first mover is always pursuing a 'symbolic' policy with a lax target.

Dynamic Approaches to Global Economic Challenges

“…The aim of this contribution is to provide an overview of our own recent work in this field (Bednar-Friedl, 2012;Bednar-Friedl andFarmer, 2010, 2011). In particular, this chapter demonstrates how different positions to climate policy within the group of industrialized countries can be attributed to differences in net foreign asset positions as well as to environmental preferences.…”

“…As this contribution summarizes the findings from three papers with different model versions (Bednar-Friedl, 2012;Bednar-Friedl andFarmer, 2010, 2011), we briefly describe the basic modeling approach which is a two-country two-good overlapping generations (OLG) model. 1 Each country is composed of perfectly competitive firms and finitely-lived consumers.…”

“…When Home's production 1 The model presented here is a combination and extension of Bednar-Friedl and Farmer (2010) and Bednar-Friedl and Farmer (2011). In Bednar-Friedl (2012), which is the basis for Sects. In Bednar-Friedl (2012), which is the basis for Sects.…”

“…Proceeding as for the previous case of two groups of industrialized countries and assuming again that the Golden Rule holds, which now requires that˛k and˛ k are chosen such that i D 0, yields the following reaction function for Home (for its derivation, see Bednar-Friedl, 2012):…”

Compensating Environmental Losses Versus Creating Environmental Gains: Implications for Biodiversity Offsets

“…In studying policies that target consumer behavior, it is especially relevant to consider the role of agents' preferences for the environment, which determine how agents respond to pollution. In this regard, Bednar-Friedl (2012) shows that environmental preferences, and in particular differences in these preferences between emerging and industrialized countries, are key factors in determining the specific climate policy that maximizes welfare. Moreover, the empirical literature highlights that environmental awareness evolves over time and changes according to the economic and environmental context (see e.g.…”