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

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  • 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.

Suggested Citation

  • Nagashima, Miyuki & Dellink, Rob & van Ierland, Ekko & Weikard, Hans-Peter, 2009. "Stability of international climate coalitions -- A comparison of transfer schemes," Ecological Economics, Elsevier, vol. 68(5), pages 1476-1487, March.
  • Handle: RePEc:eee:ecolec:v:68:y:2009:i:5:p:1476-1487
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    Cited by:

    1. Hans-Peter Weikard & Leo Wangler & Andreas Freytag, 2015. "Minimum Participation Rules with Heterogeneous Countries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 711-727, December.
    2. Anderson, Blake & M'Gonigle, Michael, 2012. "Does ecological economics have a future?," Ecological Economics, Elsevier, vol. 84(C), pages 37-48.
    3. Thierry Brechet and Henry Tulkens, 2015. "Climate Policies: A Burden, or a Gain?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    4. Dellink, Rob & Finus, Michael, 2012. "Uncertainty and climate treaties: Does ignorance pay?," Resource and Energy Economics, Elsevier, vol. 34(4), pages 565-584.
    5. Neda A. Zawahri & Ariel Dinar & Getachew Nigatu, 2016. "Governing international freshwater resources: an analysis of treaty design," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 16(2), pages 307-331, April.
    6. Costantini, Valeria & Sforna, Giorgia & Zoli, Mariangela, 2016. "Interpreting bargaining strategies of developing countries in climate negotiations. A quantitative approach," Ecological Economics, Elsevier, vol. 121(C), pages 128-139.
    7. 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.
    8. Håkon Sælen, 2016. "Side-payments: an effective instrument for building climate clubs?," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 16(6), pages 909-932, December.
    9. Bosetti, Valentina & Carraro, Carlo & De Cian, Enrica & Massetti, Emanuele & Tavoni, Massimo, 2013. "Incentives and stability of international climate coalitions: An integrated assessment," Energy Policy, Elsevier, vol. 55(C), pages 44-56.
    10. Kai Lessmann & Ulrike Kornek & Valentina Bosetti & Rob Dellink & Johannes Emmerling & Johan Eyckmans & Miyuki Nagashima & Hans-Peter Weikard & Zili Yang, 2015. "The Stability and Effectiveness of Climate Coalitions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 811-836, December.
    11. Peter Kennedy, 2016. "Cooperative Action on Greenhouse Gas Emissions and the Distribution of Global Output and damage," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(1), pages 147-166, January.
    12. repec:spr:ieaple:v:17:y:2017:i:5:d:10.1007_s10784-017-9351-3 is not listed on IDEAS
    13. Guilherme de Oliveira & Gilberto Tadeu Lima, 2015. "A Green Lewis Development Model," Working Papers, Department of Economics 2015_49, University of São Paulo (FEA-USP).
    14. repec:aen:journl:ej38-4-kersting is not listed on IDEAS
    15. Hans-Peter Weikard & Rob Dellink & Ekko Ierland, 2010. "Renegotiations in the Greenhouse," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(4), pages 573-596, April.
    16. 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.
    17. Harold Houba & Gerard Laan & Yuyu Zeng, 2015. "International Environmental Agreements for River Sharing Problems," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 855-872, December.
    18. van der Pol, Thomas & Weikard, Hans-Peter & van Ierland, Ekko, 2012. "Can altruism stabilise international climate agreements?," Ecological Economics, Elsevier, vol. 81(C), pages 112-120.
    19. repec:spr:ieaple:v:17:y:2017:i:5:d:10.1007_s10784-017-9368-7 is not listed on IDEAS
    20. Thomas Kuhn & Radomir Pestow & Anja Zenker, 2017. "Building Climate Coalitions on Preferential Free Trade Agreements," Chemnitz Economic Papers 011, Department of Economics, Chemnitz University of Technology, revised Jul 2017.
    21. Leonhard Kähler & Klaus Eisenack, 2016. "Strategic Complements in International Environmental Agreements: a New Island of Stability," Working Papers V-393-16, University of Oldenburg, Department of Economics, revised Aug 2016.
    22. Rob Dellink & Thijs Dekker & Janina Ketterer, 2013. "The Fatter the Tail, the Fatter the Climate Agreement," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(2), pages 277-305, October.

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