The main cause of global warming is carbon dioxide, which enters the atmosphere in varying amounts from different countries but is distributed equally around the globe within a year. Economists Martin and Kathleen Feldstein argue that the correct approach to global warming is not to ask individual countries to stabilise their emissions of carbon dioxide at current levels, as some have suggested. Instead, they argue that carbon dioxide emissions should be reduced in countries where the costs are least and the countries that bear that burden should be compensated by the rest of the world.

a Why is international cooperation necessary to reach an efficient outcome?

b Is it possible to devise a compensation scheme such that all countries would be better off than under a system of uniform emission reductions? Explain.


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