Curbing the emissions of carbon dioxide has become a major political challenge for the coming decades. The political feasibility of the enterprise is hampered by global disagreement over the preferred level of abatement and its distribution across countries. Because of the close connection between carbon dioxide emissions and fossil fuel use, countries that want to pursue a more restrictive policy worry that their energy-intensive industries will suffer from international competition from industries in countries that follow a laxer policy. Abating countries will see their reduction efforts be...