Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 1 A dynamic game of timing of emission rights supply on an international emissions trading system

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 2 Consequences of a global climate constraint Limit radiative forcing to 3.5 or 4 W/m 2

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 3

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 4 How to split the safety global emissions budget among the different groups of nations ?

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 5 Groups of Countries

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 6 Groups of Countries Population GDP GHG Emissions Population

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 7 Different splits

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 8 Budget Sharing Game Equilibrium under constraints ( quotas are the strategic variables )

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 9 Game with constraints One considers the time horizon and one identifies the total amount of GHG emissions, at world level, that is compatible with maintaining the SAT increase below 2ºC. –This global budget has been evaluated to be 519 GtC equiv. One distributes this global amount among the different parties in an international agreement, using equity rules. For a given split of the total GHG emissions allowance, one solves a dynamic non-cooperative game –decision variables : schedules of GHG quotas, –payoffs : welfare gains (or losses), –while respecting the allocated cumulative emissions budget, and after implementing an international emissions trading scheme.

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 10 GEMINI-E3 A CGEM (GEMINI-E3) is now used to simulate the economic outcome of the equilibrium solution in the dynamic game of quotas; An oracle-based method is used to solve the variational inequality which characterizes an equilibrium (kind of « deep computing »).

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 11

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 12 Carbon prices

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 13 Surplus* * Sum of discounted surplus divided by sum of discounted consumption

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 14 Equalize Surplus losses Find an allocation that leads to a same loss of surplus for each regions in % HFC

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 15 Eq. Surplus Allocation Eq. Surplus

Conference on the International Dimensions of Climate Policies; 21 – 23 January 2009, Bern, Switzerland TOCSIN-EU FP6 Project 16 Conclusion We have modelled the forthcoming negotiations as a sharing of an emissions budget followed by a game of timing for the quotas in each group of nations; The approach conforts a C&C like approach and ensures that the agreement will be sustainable (Nash equilibrium under the budget sharing constraints).