BENEFITS, COSTS, AND COOPERATION IN GREENHOUSE GAS ABATEMENT BERTRAND HAMAIDE 1 and JOHN J. BOLAND 2 1 R. Nouvelle, B7120 Vellereille-les-Brayeux, Belgium 2 The Johns Hopkins University, Baltimore, MD 21218-2686, U.S.A. Abstract. Abatement cost and benefit projections through 2100 are computed, assembled and in- terpreted with respect to various levels of emission reduction. Mathematical expressions describing regional costs and benefits as a function of abatement strategy are developed. Using these data and expressions, optimal abatement strategies are defined for noncooperative and cooperative (Pareto optimal) policies. The cooperative solution calls for an average emissions reduction of 16.6 percent over the 1990–2100 period, as compared to 5.8 percent in the noncooperative case. Achieving the cooperative solution would require side payments to China and potentially to the U.S., as well as stringent (though beneficial) restrictions on non-OECD countries. It is argued that Pareto optimality is technically achievable but possibly infeasible in the real world. 1. Introduction In 1896, a Swedish chemist – Svante Arrhenius – theorized that the rapid increase in the use of coal in Europe since the industrial revolution would lead to increased atmospheric carbon dioxide (CO 2 ) concentrations, and that this would cause a rise in global average temperature (Stone, 1992). A century ago, this prospect might not have seemed imminent but today the carbon dioxide buildup is a reality, and is viewed by some as a credible threat to continued human habitation of the earth. To slow or halt the rise of global average temperature, it is necessary to substan- tially reduce emissions of carbon dioxide and other greenhouse gases. With respect to carbon dioxide, this can be accomplished by refraining from tropical deforesta- tion and above all by cutting fossil fuel use. In addition to having a beneficial effect on climate change, less reliance on fossil fuels will also reduce air pollution and oil security problems that are linked through the gases, pollutants and technologies associated with fossil fuel combustion (MacKenzie, 1989). Therefore, even if the importance of global warming is in doubt, reducing carbon dioxide emissions is likely to be associated with other beneficial effects. This paper, however, focuses on the linkage between carbon dioxide emissions and global warming. Climate change is a worldwide problem and its abatement will require a world- wide solution: ‘no nation has either the political mandate or the economic power to affect a change of this type alone’ (World Commission on Environment and Devel- opment (WCED), 1987, p. 176). Industrialized market countries are currently the most important emitters of greenhouse gases. This is the result of energy use levels Climatic Change 47: 239–258, 2000. © 2000 Kluwer Academic Publishers. Printed in the Netherlands.