Valuing equally the environmental goods in rich and poor countries in a Post-Kyoto world

The optimal pollution abatement levels are found by maximizing global social welfare in a permit and no-permit trade systems under the constrain that environmental goods are evaluated equally in rich and poor countries. Evaluating equally environmental goods in poor and rich countries makes possible to build a relation between the income elasticity of marginal utility e and the inequality aversion parameter γ (Fankhauser et al., 1997; Stenman, 2000), which narrows the variation of e for a particular value of γ. As a result, smaller variation for optimal abatement levels is obtained, which allows to inspect what Post-Kyoto abatement levels for poor and rich countries respect the requirement of evaluating equally the environmental goods in rich and poor countries. One finding is that in a Post-Kyoto world, the optimal abatement levels of poor countries have to be significantly big, if we aim to evaluate equally the environmental goods in poor and rich countries. Furthermore, in a permit trade system, if we plan big amount emission reductions then, it can happen that poor countries have to carry out higher emission reductions than rich ones.