New working paper official together with Jonathan Camuzeaux, Environmental Defense Fund, and Gernot Wagner, New York University. Forthcoming in the National Institute Economic Review next year.

Abstract:

China and the United States are the two largest emitters of greenhouse gases, making them pivotal players in global climate negotiations. Within the coming decade, however, India is set to become the most important counterpart to the United States, as it overtakes China as the country with the most at stake depending on the type of global burden-sharing agreements that reached, thus becoming a member of the “Climate G2.” We analyse financial flows that are necessary to equilibrate marginal abatement costs across countries and regions under a wide range of burden-sharing agreements: from pure grandfathering based on current emissions to equal per-capita allocation. Among the four largest players, the United States, the EU-27, China, and India, it is China that would currently be the largest net seller of emissions allowances in all but the grandfathered scenario. The United States would be the largest net buyer. However, India is poised to take China’s position by around 2030. That leaves the United States and India as the two major countries with most to gain and lose, depending on the type of climate deal reached.

Full text available here, and to cite:
Camuzeaux, J., T. Sterner, and G. Wagner, “India in the coming climate G2?” Forthcoming in National Institute Economic Review (12 December 2019).