International and Intergenerational Dimensions of Climate Change: North-South Cooperation in an Overlapping Generations Framework

Abstract

Global environmental problems such as climate change have both an international and an intertemporal dimension. Recently, some papers have used an overlapping generations framework to analyze the climate change problem taking into account jointly the issues of intergenerational equity and intertemporal efficiency but without considering the international aspect of the problem. In this paper, we extend such approach by considering an overlapping generations model of climate-economy interactions where the world is split into two regions: North and South. We resort to numerical simulations of the calibrated model to analyze the effect of cooperation over economic and climate variables under two different scenarios: long-lived and short-lived governments. The main aim of our analysis is to test numrically whether John and Pecchenino´s (1997) theoretical result, which states that international agreements with transfers that lack an intergenerational perspective could actually harm the environment, applies low us to conclude that when we consider short lived governments: (1) the lack of cooperation always leads to higher environmental degradation, (2) the higher the welfare weight attached to the North under cooperation, the lower the environmental degradation in the long run, and (3) some cooperative scenarios may lead in the short run to higher environmental degradation than what it would arise in the non cooperative scenario.