1. The relevant provision of the Kyoto Protocol states “For the purpose of meeting its commitments under Article 3 any Party included in Annex I may transfer to or acquire from any other such Party emission reduction units … provided that: … the acquisition of emission reduction units shall be supplemental to domestic actions for the purposes of meeting commitments under Article 3.” See http://www.cop4.org/.
2. These runs were made with the RICE-2001 model which is a slightly modified version of the RICE-99 model described in W. Nordhaus and J. Boyer Warming the World: Economic Modeling of Global Warming (MIT Press Cambridge 2000). The methodology and results of the original runs are presented in chapter 8 of the book. The book is available in full in electronic form at www.econ.yale.edu/∼nordhaus/homepage/dicemodels.htm. The version of the RICE-2001 model used for the base run of these calculations can be found under “RICE-2001: Science: baseline run” at that Web site.
3. Discounted abatement costs are calculated as the present value of consumption of different regions or countries over the next 30 decades discounted at a consumption discount rate of approximately 5% per year. Note that the very long time horizon is not essential to the results but is necessary to ensure that slight changes in the timing of abatement do not distort the measure of costs.
4. Like much environmental policy the Kyoto Protocol relies primarily on “quantitative restrictions” in the form of emissions reductions. Such restrictions have the deficiency that the global constraints operate completely independently of the costs of meeting the constraints. Economists have pointed to the advantage of “price-type” regulations particularly when there are many participants and many potential approaches for meeting the objectives. For a discussion of the pitfalls of quantitatively oriented approaches in the context of global-warming policy see William Nordhaus “After Kyoto: Alternative Mechanisms to Control Global Warming ” June 2001 available at www.econ.yale.edu/∼nordhaus/homepage/recent_stuff.html.
5. Development of the RICE-99 and RICE-2001 models was supported by the National Science Foundation and the Department of Energy.