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Formation of Climate Coalitions and Preferential Free Trade - The Case for Participation Linkage

Author

Listed:
  • Thomas Kuhn

    (Faculty of Economics and Business Administration, Chemnitz University of Technology)

  • Radomir Pestow
  • Anja Zenker

Abstract

We study the endogenous formation of climate coalitions linked to a preferential free trade arrangement. In a multi-stage strategic trade and participation game, coalition and fringe countries dispose of a discriminatory tariff on dirty imports as well as emission permits imposed on domestic producers and traded on a common permit market inside the coalition, or respectively local markets outside. The participation game is solved by Monte-Carlo simulation, while the general equilibrium and the policy game are solved analytically. We find that preferential free trade can create effective climate coalitions in terms of depth and breadth.

Suggested Citation

  • Thomas Kuhn & Radomir Pestow & Anja Zenker, 2022. "Formation of Climate Coalitions and Preferential Free Trade - The Case for Participation Linkage," Chemnitz Economic Papers 057, Department of Economics, Chemnitz University of Technology, revised Nov 2022.
    • Handle: RePEc:tch:wpaper:cep057
    as

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    File URL: https://www.tu-chemnitz.de/wirtschaft/vwl1/RePEc/download/tch/wpaper/CEP057_Kuhn.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Climate Change; International Environmental Agreements; Preferential Free Trade; Issue Linkage; Emission Permits;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F15 - International Economics - - Trade - - - Economic Integration
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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