Sticks and carrots for the design of international climate agreements with renegotiations. (English) Zbl 1301.91038
Summary: This paper examines renegotiations of international climate agreements for carbon abatement. We explore coalition stability under ‘optimal transfers’ that have been suggested to stabilise international environmental agreements (e.g. [M. McGinty, “International environmental agreements among asymmetric nations”, Oxf. Econ. Pap. 59, No. 1, 45–62 (2007; doi:10.1093/oep/gpl028)]). Such transfer schemes need to be refined when agreements are renegotiated. We determine the requirements that transfers between signatories of an international climate agreement must satisfy in order to stabilise the sequence of agreements that performs best in terms of provision of the public good ‘carbon abatement’. If these requirements are met, no country wants to change its membership status at any stage. In order to demonstrate the applicability of our result we use the STACO model, a 12-regions global model, to assess the impact of well-designed transfer rules on the stability of an international climate agreement. Although there are strong free-rider incentives, we find a stable grand coalition in the first commitment period in a game with one round of renegotiations if renegotations take place sufficiently early.
MSC:
| 91B76 | Environmental economics (natural resource models, harvesting, pollution, etc.) |
| 91B74 | Economic models of real-world systems (e.g., electricity markets, etc.) |
| 91A40 | Other game-theoretic models |
| 91B32 | Resource and cost allocation (including fair division, apportionment, etc.) |
Keywords:
stability of coalitions; international environmental agreements; partition function approach; sharing rules; renegotiations; climate agreementsReferences:
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