Equity and efficiency in mitigating climate change

The Kyoto Protocol exempts developing countries from emissions limits for equity reasons at the expense of efficiency. This dissertation addresses the question: Can imposing emissions limits on developing countries for efficiency reasons be reconciled with equity?. Contrary to the prevailing consensus, this dissertation argues that equity and efficiency are inextricably linked in the case of global public goods like climate control. This relationship is first explored through a series of game-theoretic microeconomic models of countries' decisions to participate in an efficient climate control treaty. These models demonstrate that countries who benefit less from abatement and, or who can abate emissions at lower cost may require side payments in exchange for their participation. Depending upon which countries require such side payments, the payments required for efficiency may or may not improve global equity. This dissertation then critiques an important model by Chichilnisky, Heal, and Starrett that claims efficiency in climate control requires redistributive transfers to developing countries to equate marginal valuations of consumption across countries. Using their model of abatement as a privately produced public good and efficiency as Pareto optimality, this dissertation points out an important theoretical link between equity and efficiency in the case of all public goods. Specifying the efficient level of provision of public goods always implies the existence of a social welfare function which, by necessity, transforms equity issues into efficiency issues. Finally, using the Philippines as a case study, this dissertation explores whether paying for conservation in developing countries improves the efficiency of global climate control. Deforestation contributes to climate change. Paying developing countries for carbon storage and sequestration may provide positive incentives for conservation and serve as side payments to induce developing countries---who may benefit less from mitigating climate change and, or who can abate at lower cost---to participate in an efficient climate treaty. This dissertation estimates the sequestration and storage benefits and opportunity costs of conservation in the Philippines, which include forgone subsistence, and commercial logging income. This dissertation finds that for abatement costs of $100/ton or more in the industrialized world, conservation in the Philippines is a cost-efficient mitigation alternative.