Socio-economic Aspects of the Greenhouse Effect: Climate Fund

The project 'Socio-economic aspects of the greenhouse effect: Climate fund' studies the impact of international capital transfers on the efficiency and efficacy of greenhouse gas emission reduction. The absolute costs of emission abatement is substantially lower in less developed countries. The associated reduction of the damage due to conventional air pollution is higher in the richer countries in both absolute and relative terms. The costs of climatic change are relatively higher (but absolute lower) in the developing countries. Prime impacts are on agriculture (in the developing world) and human health (highly valued in the developed world). Costs of emission reduction and climatic change are joined in a nine region, quasi-Ramsey, integrated climate-economy model, called FUND, The first calculations with this model show that the (hardly known) dynamics of climate change and the great uncertainties play a critical role, that free riding behaviour need not be as prominent a problem as is generally believed, and that international capital transfers do not seem to substantially influence the optimal emission control, as the regions most interested in climate change do not have much capital to transfer. Negotiated emission caps are likely to alter this conclusion.