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on the stringency of policies. Our analysis suggests that policy should
aim for limiting temperature to a range between 2°C and 3°C above
preindustrial levels (here taken to be the 1900 temperature) depend-
ing upon costs, participation rates, and discounting. The lower target is
appropriate if costs are low, participation rates are high, and the discount
rate on future economic impacts is low. A higher target would apply for
high costs, low participation rates, and high discounting.
An effective policy must necessarily be global in scope. Earlier trea-
ties (such as the Kyoto Protocol) were ineffective because they provided
no incentives to encourage participation. Countries have strong incen-
tives to free ride on the efforts of others because emissions reductions are
local and costly while the benefi ts are diffuse and distant over space and
time. An effective global arrangement will need an effective mechanism
to encourage participation and discourage free riding. The most promis-
ing approach is to impose import tariffs on the products and services of
nonparticipants. This will be suffi ciently burdensome that it will encour-
age most countries to participate in an international climate regime.
As Part V discusses, a realistic appraisal must recognize the high hur-
dles on the road to effective policies to slow global warming. Even though
climate scientists have made great strides in understanding the basic
trends, it has proven diffi cult to implement policies to slow climate change.
One major reason for the slow progress is the nationalist dilemma,
which leads to free riding. Countries that do not participate in a global
agreement to reduce emissions get a free ride on the costly abatement
undertaken by other countries. This incentive leads to a noncooperative
free-riding equilibrium in which few countries undertake strong climate-
change policies—a situation that closely resembles the current interna-
tional policy environment. They speak loudly but carry no stick at all. A
link whereby nonparticipants are penalized through international trade
tariffs would help alleviate the free-riding syndrome.
Additionally, there is a tendency for the current generation to ride
free by pushing the costs of dealing with climate change onto future
generations. Generational free riding occurs because most of the ben-
efi ts of emissions reductions today would accrue many decades in the
future.
 
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