The authors evaluate the consistency of economic incentives and climate objectives in Europe, with regard to energy markets. In this context, they examine policy interactions between the EU-ETS and Europe's renewable target—and the role of natural gas in a transition to a low-carbon economy.

"A successful international climate policy framework will have to meet two conditions, build a coalition of countries that is potentially effective and give each member country sufficient incentives to join and remain in this coalition. Such coalition should be capable of delivering ambitious emission reduction even if some countries do not take mitigation action. In addition, it should meet the target without exceedingly high mitigation costs and deliver a net benefit to member countries as a whole. The novel contribution of this paper is mostly methodological, but it also adds a better qualification of well-known results that are policy relevant."

A "deal" is proposed in this paper, whereby all major-emitting countries, including the United States and China, agree to reduce emissions through implementation of significant, mutually agreeable, domestic emission-reduction policies. To resolve the competitiveness and equity concerns, a proposed Carbon Mitigation Fund would be created. This proposed fund is contrasted with other existing and proposed mitigation funds and finance mechanisms. 

This paper explores the interactions of international policy architecture and technology availability on the limitation of atmospheric CO2 concentrations to 500 ppm in the year 2095. We find that technology is even more important to reducing the costs of emissions mitigation when international policy structures deviate from immediate and full participation. We also find that the international diffusion of climate technology may be as or more important to domestic mitigation cost containment as domestic technology diffusion. We observe that near-term carbon prices reflect in a very direct way expectations about technology a half century and more into the future. We find that the policy architecture has a relatively modest effect on global emissions limitation pathways when compared with the impact of technology availability and observe that more rapid technology improvements reduce the relative influence of the policy architecture. Finally, we consider the implications combining CO2 capture and storage technology with bioenergy production, namely electricity production with negative carbon emissions.