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Stability of international climate coalitions -- A comparison of transfer schemes

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Author Info

  • Nagashima, Miyuki
  • Dellink, Rob
  • van Ierland, Ekko
  • Weikard, Hans-Peter

Abstract

This paper studies the impact of pragmatic and optimal transfer schemes on the incentives for regions to join international climate agreements. With an applied model that comprises twelve world regions we investigate: (i) a benchmark without transfers, (ii) scenarios with allocation-based rules where coalition members receive tradable emission permits proportional to initial or future emissions, (iii) scenarios with outcome-based rules where the coalition surplus is distributed proportional to emissions, and (iv) a scenario based on an optimal sharing rule where the coalition surplus is distributed proportional to outside option payoffs. We find that well-designed transfer schemes can stabilise larger coalitions and increase global abatement levels. In our applied setting we find that for allocation-based and outcome-based rules only small coalitions are stable, and, in the case of grandfathered emission permits, there is no stable coalition at all. Some obstacles associated with grandfathered emission permits can be overcome by incorporating the expected growth of emissions in developing countries in the distribution of emission permits. For the optimal transfer scheme we find that larger coalitions, which include key players such as the United States and China, can be stable, but no transfer scheme is capable of stabilising the Grand Coalition.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 68 (2009)
Issue (Month): 5 (March)
Pages: 1476-1487

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Handle: RePEc:eee:ecolec:v:68:y:2009:i:5:p:1476-1487

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Web page: http://www.elsevier.com/locate/ecolecon

Related research

Keywords: International climate agreements Transfer schemes Tradable emission permits Coalition stability;

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Cited by:
  1. Valentina Bosetti & Carlo Carraro & Enrica De Cian & Emanuele Massetti & Massimo Tavoni, 2011. "Incentives and Stability of International Climate Coalitions: An Integrated Assessment," Working Papers 2011.97, Fondazione Eni Enrico Mattei.
  2. Jobst Heitzig, 2013. "Bottom-Up Strategic Linking of Carbon Markets: Which Climate Coalitions Would Farsighted Players Form?," Working Papers 2013.48, Fondazione Eni Enrico Mattei.
  3. Rob Dellink & Thijs Dekker & Janina Ketterer, 2013. "The Fatter the Tail, the Fatter the Climate Agreement," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 56(2), pages 277-305, October.
  4. Hans-Peter Weikard & Rob Dellink & Ekko Ierland, 2010. "Renegotiations in the Greenhouse," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 45(4), pages 573-596, April.
  5. Dellink, Rob & Finus, Michael, 2012. "Uncertainty and climate treaties: Does ignorance pay?," Resource and Energy Economics, Elsevier, vol. 34(4), pages 565-584.
  6. Harold Houba & Gerard van der Laan & Yuyu Zeng, 2013. "International Environmental Agreements for River Sharing Problems," Tinbergen Institute Discussion Papers 13-157/II, Tinbergen Institute.
  7. Anderson, Blake & M'Gonigle, Michael, 2012. "Does ecological economics have a future?," Ecological Economics, Elsevier, vol. 84(C), pages 37-48.
  8. Thijs Dekker & Rob Dellink & Janina Ketterer, 2013. "The Fatter the Tail, the Fatter the Climate Agreement - Simulating the Influence of Fat Tails in Climate Change Damages on the Success of International Climate Negotiations," CESifo Working Paper Series 4059, CESifo Group Munich.

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