We build a three-stage model of international negotiations on regulation of the level of total emissions of greenhouse gases, and examine the possibility of a cooperative agreement and the Pareto optimality of the outcome. First, we derive the condition for Pareto optimal allocations, which is an extension of the celebrated Lindahl-Bowen-Samuelson condition and Chichilnisky et al.'s (2000) result. Next, we show that if the distribution rule of initial emission permits is the proportional rule to the Nash equilibrium emissions in the noncooperative game, then some cooperative agreement can be reached in the negotiations. However, for many other (equitable) distribution rules, no cooperative agreement is possible. Even if a cooperative agreement is attained, the outcome is rarely Pareto optimal.
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Paper provided by Graduate School of Economics, Hitotsubashi University in its series Discussion Papers with number
2004-13.
Length: 27 p. Date of creation: Mar 2005 Date of revision: Handle: RePEc:hit:econdp:2004-13
Note: This paper supersedes my previous paper distributed under the title, "International Negotiations for Reducing Greenhouse Gases with Emission Permits Trading." Contact details of provider: Phone: +81-42-580-8000 Web page: http://www.econ.hit-u.ac.jp/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Koji OHTAGAKI).
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