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Penalty tariff rate 0 percent 4 percent TABLE 1-EFFECTS OF PARTICIPATION IN NUMERICAL EXAMPLE -11.9 -11.9 US is participant Abatement Damages Trade 10.7 10.7 0.0 36.7 Net benefits -1.2 35.5 Abatement -0.3 -0.3 US is not a participant Damages 7.3 7.3 Trade 0.0 -15.6 Net benefits 7.0 -8.6 Net effect of participation -8.2 44.1 Notes: This table provides an illustration of the economic effects of participation for the US with and without a pen- alty tariff. The difference between the two lines is the impact of the penalty tariff. With a penalty tariff, the global externality is effectively internalized, giving incentives for self-interested countries to participate in the Climate Club. Figures in billions of 2011 US$ from the C-DICE model below for a global SCC of $25 per ton of CO₂. ole 1 is from Nordhaus (2015). Use the information provided to answer 1-4 1. What is the net benefit of participating in the climate agreement if there is no tariff? 2. What is the net benefit of not participating in the climate agreement if there is no tariff?

Penalty tariff rate 0 percent 4 percent TABLE 1-EFFECTS OF PARTICIPATION IN NUMERICAL EXAMPLE -11.9 -11.9 US is participant Abatement Damages Trade 10.7 10.7 0.0 36.7 Net benefits -1.2 35.5 Abatement -0.3 -0.3 US is not a participant Damages 7.3 7.3 Trade 0.0 -15.6 Net benefits 7.0 -8.6 Net effect of participation -8.2 44.1 Notes: This table provides an illustration of the economic effects of participation for the US with and without a pen- alty tariff. The difference between the two lines is the impact of the penalty tariff. With a penalty tariff, the global externality is effectively internalized, giving incentives for self-interested countries to participate in the Climate Club. Figures in billions of 2011 US$ from the C-DICE model below for a global SCC of $25 per ton of CO₂. ole 1 is from Nordhaus (2015). Use the information provided to answer 1-4 1. What is the net benefit of participating in the climate agreement if there is no tariff? 2. What is the net benefit of not participating in the climate agreement if there is no tariff?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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### Table 1—Effects of Participation in Numerical Example | Penalty tariff rate | US is participant | | | | US is not a participant | | | | |---------------------|--------------------------|----------------------------|-------------------------|-------------------------|-------------------------|----------------------------|-------------------------|-------------------------| | | Abatement | Damages | Trade | Net benefits | Abatement | Damages | Trade | Net benefits | | 0 percent | -11.9 | 10.7 | 0.0 | -1.2 | -0.3 | 7.3 | 0.0 | 7.0 | | 4 percent | -11.9 | 10.7 | 36.7 | 35.5 | -0.3 | 7.3 | -15.6 | -8.6 | #### Notes: This table provides an illustration of the economic effects of participation for the US with and without a penalty tariff. The difference between the two lines is the impact of the penalty tariff. With a penalty tariff, the global externality is effectively internalized, giving incentives for self-interested countries to participate in the Climate Club. Figures in billions of 2011 US$ from the C-DICE model below for a global SCC of $25 per ton of CO₂. --- **Table 1 is from Nordhaus (2015). Use the information provided to answer:** 1. **What is the net benefit of participating in the climate agreement if there is no tariff?** - The net benefit of participating when there is no tariff is -1.2 billion US$. 2. **What is the net benefit of not participating in the climate agreement if there is no tariff?** - The net benefit of not participating when there is no tariff is 7.0 billion US$. 3. **Construct the payoff matrix for two identical countries whose actions are “Participate” and “Do Not Participate” when there is no tariff. Assume that if either and/or both player(s) does not participate, benefits are equal to the answer from question 2.** - **Participate | Do Not Participate** - **Participate**: (-1.2, -1.2) | (-1.2
Transcribed Image Text:### Table 1—Effects of Participation in Numerical Example | Penalty tariff rate | US is participant | | | | US is not a participant | | | | |---------------------|--------------------------|----------------------------|-------------------------|-------------------------|-------------------------|----------------------------|-------------------------|-------------------------| | | Abatement | Damages | Trade | Net benefits | Abatement | Damages | Trade | Net benefits | | 0 percent | -11.9 | 10.7 | 0.0 | -1.2 | -0.3 | 7.3 | 0.0 | 7.0 | | 4 percent | -11.9 | 10.7 | 36.7 | 35.5 | -0.3 | 7.3 | -15.6 | -8.6 | #### Notes: This table provides an illustration of the economic effects of participation for the US with and without a penalty tariff. The difference between the two lines is the impact of the penalty tariff. With a penalty tariff, the global externality is effectively internalized, giving incentives for self-interested countries to participate in the Climate Club. Figures in billions of 2011 US$ from the C-DICE model below for a global SCC of $25 per ton of CO₂. --- **Table 1 is from Nordhaus (2015). Use the information provided to answer:** 1. **What is the net benefit of participating in the climate agreement if there is no tariff?** - The net benefit of participating when there is no tariff is -1.2 billion US$. 2. **What is the net benefit of not participating in the climate agreement if there is no tariff?** - The net benefit of not participating when there is no tariff is 7.0 billion US$. 3. **Construct the payoff matrix for two identical countries whose actions are “Participate” and “Do Not Participate” when there is no tariff. Assume that if either and/or both player(s) does not participate, benefits are equal to the answer from question 2.** - **Participate | Do Not Participate** - **Participate**: (-1.2, -1.2) | (-1.2
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