Evaluation of international climate change architectures using a computable general equilibrium model

This study employs a computable general equilibrium model to explore the effects of various components of an international climate change architecture on global and regional emissions price paths and welfare. Within a universally adopted cap-and-trade system, I assess the effects of changing the method of emissions permit allocation, co-ordination of trading systems amongst regions, and ambition of the emissions reduction target. I find that wealth effects may increase the global emissions price required to reach a specified reduction target when permits are allocated to regions with higher consumer emissions intensity, namely developing regions. All regions benefit from global permit trading although the regions with higher marginal abatement costs, namely industrialized and transition economy regions, experience greater welfare gains. Lastly, reaching an aggressive reduction target requires a significantly higher global emissions price and results in greater welfare losses in most regions.