A proposal to increase developing country participation in international climate policy.

The benefits from reducing greenhouse gases (GHG) emissions are not limited to a single consumer or group of consumers but are available to a large set of countries and populations across generations. Underprovision and free-riding are thus to be expected in the climate change issue. Optimal provision of this type of public good requires creating incentives for international cooperation. Game theorists have proposed to restructure incentives through issues linkages consisting in exchanging concessions across different policy dimensions. In this paper we discuss the opportunity to link climate change to international trade, technology R&D and diffusion, and greening development assistance. We propose another option, called the “rent-sharing” approach, that would guarantee meaningful participation of developing countries (DCs) without challenging their economic development. Developing countries would have the opportunity to enter the emission markets, and benefit from financial transfers, only if their agree with a rule that would guarantee a gainful domestic participation. Our numerical example shows that China may be better off, while accepting a significant CO₂ emission reduction effort. [Copyright &y& Elsevier]