Incomplete International Cooperation to Reduce CO2 Emissions: Alternative Policies

As a first step toward a global treaty to control CO2 emissions, individual countries contemplate unilateral reductions in their fuel use. Such actions, if significant, would reduce world-market fuel prices, thereby stimulating fuel use elsewhere and causing problems for exporting countries, possibly jeopardizing this policy initiative. Among the policy alternatives for mitigating the price effects of reduced demand, reduced fuel consumption combined with buying or leasing fuel deposits to achieve a reduced supply is discussed in particular. This policy, which at first seems prohibitively costly, is shown to dominate the original policy approach under a fairly wide set of circumstances.