Associate Professor, Department of Economics
Resident Fellowship Years: 2022-2023
Faculty Profile: Terrence Iverson
Research Focus: Climate change constitutes a profound economic and diplomatic challenge, because greenhouse gas emissions spread globally, but there is no global authority with the power to regulate country-level emissions in line with what would be in the collective best interest of the world at large. Designing an international system of incentives/penalties to curb emissions and their impacts is among the most difficult issues in the ongoing global climate negotiations. This project will build on the concept of a climate club to link trade and climate agreements, and, using game theory, create a tiered approach that takes into account the difference between larger and smaller countries. Iverson will develop a “two-tier climate club” in which a coalition that includes the US, the EU, and China uses the threat of trade-based penalties to induce countries to contribute to global carbon abatement. To evaluate related policy questions, a quantitative economic trade model will be built that uses game theory to simulate strategic interactions within the coalition, along with those that arise between the coalition and other countries.