Developing Countries And The Unfccc Process: Some Simulations From An Armington Extended Climate Model

We report simulation results for alternative multilateral emissions cuts and accompanying policies which could come under renewed reconsideration for the process to follow the Durban UNFCCC negotiations. The model is an Armington type trade model extended to capture climate change. We calibrate the model to alternative BAU damage scenarios following the Stern report and the literature that has followed. We consider different depths, forms, and timeframes for emission reductions by China, India, Russia, Brazil, US, EU, Japan, and a residual row both jointly and block wise. We assume regionally uniform percentage of both climate change and damages by region, which are relaxed later in sensitivity analysis. The welfare impacts of both emission reductions and accompanying measures are computed in Hicksian money metric equivalent form over three alternative potential commitment periods: 2012–2020, 2012–2030, and 2012–2050. Our multiyear multicounty global modeling framework captures the benefit of emission mitigation through preferences incorporating temperature change. Countries are linked not only through shared welfare impacts of global temperature change but also through trade among country subscripted goods. These trade impacts influence net country benefits from alternative emission reduction agreements. We also evaluate the potential impacts of potential accompanying mechanisms including funds/transfers, border adjustments, and tariffs.