I just attended a lucid lecture by my colleague Eduardo Ley that made me question whether the position of developing countries such as China and India on mitigating climate change is clearly in their best interest.  The lecture was about the private provision of public goods.  Using a simple, diagrammatic framework known as the Kolm triangle (below), 

Eduardo models the situation when two countries decide on how much to spend on “private goods,” such as their own economic growth, and a public good, such as a reduction in greenhouse gas (GHG) emissions.  In this framework, it is easy to show that when the two countries play a non-cooperative game (each taking the other’s decision as given), the resulting equilibrium can be improved upon.  That is, without cooperation, we will have less GHG emission reduction than both countries would like.  This is fairly standard. 

Now come two surprising results.  First, if one country takes the lead in reducing GHG emissions, the resulting equilibrium leaves the other country worse off.  Yet this is what India and other developing countries are asking for: that the developed countries first reduce their emissions and not expect the poorer countries to reduce theirs until later.  The intuition is that the developed countries will take into account the fact that the developing countries will eventually reduce their emissions, and adjust their GHG reduction accordingly.  As a result, the developed country is better off and the developing country worse off.

The second result is that if one country subsidizes the other country’s emission reduction, again the first country is better off and the second worse off.  The intuition here is that, by subsidizing the poor country’s emission reductions, the rich country is inducing it to reduce emissions more.  But this means the rich country needs to reduce emissions less and can therefore enjoy more of the private good.  Again, this result calls into question the current approach of having rich countries subsidize emission reductions in poor countries through carbon financing and the like.

To be sure, these are results from a very simple model that abstracts from various features of the real world.  But the fact that they show that some of the standard positions of developing countries may end up leaving them worse off should at least make us think through the logic of these positions, and ensure that the type of effects captured by these models don’t undermine the interests of poor countries.

Additional resources here on climate change and poverty.