Climate policy addresses a global problem, with costs and benefits distributed unevenly around the world. This paper recognises that questions of efficiency and equity are central to the allocation of costs and they are typically handled either by modelling optimal policies based on economic efficiency, or by setting standards that embody principles of equity.In this analysis, the authors employ their Climate and Regional Economics of Development (CRED) integrated assessment model to assess the optimal international allocation of effort. CRED scenarios are compared to the results of an equity-oriented burden-sharing framework, Greenhouse Development Rights (GDRs), which allocates effort to countries based on their responsibility (emissions) and capacity (income). The authors find that the equity-based approach and the economically optimal approach are ultimately quite consistent. This result is a reflection of the fact that both approaches imply large transfers from the wealthy countries to the poorer. In GDRs, these transfers are justified by the fact that the majority of the world’s capacity and responsibility reside in the wealthy countries. In CRED, these transfers are justified by a straightforward implementation of the notion of declining marginal utility of income. Therefore, it is more efficient (in the case of CRED) and more equitable (in the case of GDRs) for much of the mitigation that is needed in the poorer countries to be financed by the wealthy countries. It is concluded that there is no conflict, for the world as a whole, between efficient economic growth and optimal climate outcomes. However, this result has different implications for high-income and low-income countries and key unresolved questions remain:

How far from the global welfare and climate optimum is it necessary to deviate in order to win acceptance of climate policy in high-income countries?
How far from the optimum is it possible to deviate, and still stabilise the climate? 
How much, if at all, do the answers to the previous two questions overlap?