Three blocs of nations are beginning negotiations aimed at reducing the emissions of greenhouse gases (GHGs). The blocs are the United States, the European Community, and a coalition of developing nations (DNs). Table A shows each bloc€™s current GHG emissions and the annual cost of reducing emissions to lower levels. The extent of global warming depends on the total GHG emissions of the three blocs. Each bloc would benefit from global emission reductions. Table B lists these benefits (measured vis-à-vis the status quo). In both tables, emissions are measured in billions of tons per year.
a. Is global warming a kind of prisoner€™s dilemma? Is it in the self-interest of any of the blocs to reduce emissions unilaterally? Explain briefly.
b. In preliminary talks, Europe has sought an agreement calling for €œshared sacrifices€™€™€”that is, multilateral emission reductions. However, because of large budget deficits, neither the United States nor Europe is prepared to extend monetary aid to the developing world in compensation for its reductions. Does there exist a multilateral reduction plan that benefits all blocs?
c. Suppose, instead, that financial payments between blocs are feasible. Identify the efficient, global reduction plan. How much reduction should each bloc undertake, and what sort of compensation is necessary? (Any incremental emission reduction should be undertaken as long as the additional global benefit exceeds the extracost.)

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TABLE A Costs of Reducing Emissions ( Billions per Year) United States 300 million $14 trillion Emissions Cost Developing Nations 2 billion $6 trillion Population National Income 400 million $16 trillion Emissions Cost Emissions Cost Status Quo1 $o 9 1.0 18 1.2 12 100 TABLE B Benefits from Emission Reductions Billions per Year) Total United Total United Emissions States Europe DNEmissions States Europe DNs 18 24 16 24 32 40 2.8 60 72