tional demands would be substantial. Creating a system that could generate effective incentives for compliance and continued commitment would require considerable institutional ingenuity (Kingsbury et al., 2009).

Scenario 3:
A Partial Regime Without Financial Transfers

In a third scenario, the high-income countries would go ahead with vigorous programs to limit emissions but would refuse to make large international financial transfers; low- and middle-income countries would refuse to take vigorous action that they would have to finance themselves. This sort of global regime would be very unsatisfactory in terms of emissions limitation worldwide, and it would raise serious issues of competitiveness insofar as producers in low-income countries were exempted from the costs of emissions control measures. (Similar issues would arise in scenario 2 as a result of financial transfers that relieved producers in low-income countries of the full costs of emissions reductions.) Issues of emissions leakage would be particularly serious.

In this scenario, it would be important to identify “win-win” technological advances (for example, improved agricultural methods that reduce emissions without sacrificing yields, or efficient, low-emissions coal-fired power plants) that help low- and middle-income countries to reduce emissions through measures that promote their economic development. In the absence of financial transfers, creative technological solutions and institutions to facilitate technology transfer would be especially important.

Of great value in this regard are international cooperative efforts such as the International Partnership for Energy Efficiency Cooperation (which helps governments identify and implement policies and programs for promoting energy efficiency) and international cooperative research and development (R&D) activities, such as those listed earlier in this section. A few studies have explored optimal policy strategies for fostering this type of international cooperation (e.g., Golombek and Hoel, 2009; Qiu and Tao, 1998).

Competition and Climate Change

Although explicit cooperation is one way to induce effective action, competition can also generate measures to help limit the magnitude of climate change. Governments are increasingly coming to understand the opportunities for economic growth that can result from playing a leadership role in the transition to a new “green” industrial era. Private-sector and government actions can change rapidly when climate change

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