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Financial transfers to sustain international cooperation in the climate change framework

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  • GERMAIN, Marc

    ()
    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

  • VAN YPERSELE, Jean-Pascal

    ()
    (Institut d'astronomie et de géophysique Georges Lemaître ( ASTR), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

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    Abstract

    This paper deals with a a cooperative game theoretic analysis of the economics of international agreements on climate change. To cope with the question of the voluntary implementation of the international optimum, a financial transfer scheme is proposed under which no countries nor subgroup (coalition) of countries would have an interest not to join to the international agreement. The transfer scheme presents the originality to be designed in a closed-loop dynamic framework where cooperation is renegotiated at each period taking account of the current stock of pollutant. The transfer scheme is applied to the climate change problem, making use of a simple model inspired by Kverndokk (1994) and Nordhaus and Yang (1996). The results show that with the proposed sidepayments, international cooperation is indeed individually rational and rational in the sense of coalitions.

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    Bibliographic Info

    Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1999036.

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    Date of creation: 01 Jun 1999
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    Handle: RePEc:cor:louvco:1999036

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    Related research

    Keywords: climate change; dynamic games; cooperative games; coalitions; sidepayments;

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    References

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    1. Kaitala, Veijo & Pohjola, Matti & Tahvonen, Olli, 1990. "Transboundary Air Pollution and Soil Acidification: A Dynamic Analysis of an Acid Rain Game between Finland and the USSR," Discussion Papers 344, The Research Institute of the Finnish Economy.
    2. Karl-Göran Mäler & Aart De Zeeuw, 1998. "The Acid Rain Differential Game," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(2), pages 167-184, September.
    3. Zeeuw, A.J. de, 1998. "The acid rain differential game," Open Access publications from Tilburg University urn:nbn:nl:ui:12-77117, Tilburg University.
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    Cited by:
    1. GERMAIN, Marc & VAN STEENBERGHE, Vincent, 2001. "Constraining equitable allocations of tradable greenhouse gases emission quotas by acceptability," CORE Discussion Papers 2001005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. M. Germain & V. van Steenberghe, 2003. "Constraining Equitable Allocations of Tradable CO 2 Emission Quotas by Acceptability," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(3), pages 469-492, November.
    3. GERMAIN, Marc & TOINT, Philippe & TULKENS, Henry & DE ZEEUW, Aart, . "Transfers to sustain dynamic core-theoretic cooperation in international stock pollutant control," CORE Discussion Papers RP -1637, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Porchiung Chou & Cheickna Sylla, 2008. "The formation of an international environmental agreement as a two-stage exclusive cartel formation game with transferable utilities," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 8(4), pages 317-341, December.

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