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Trade sanctions and the stability of climate coalitions

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  • Hagen, Achim
  • Schneider, Jan

Abstract

We investigate whether trade sanctions against outsiders can foster climate cooperation in self-enforcing international environmental agreements if outsiders retaliate. We find a threshold effect: In small coalitions incentives to be a coalition member decrease whereas in large coalitions they increase. Thus, trade sanctions can be an effective tool in climate policy only after a sufficiently large climate coalition has already been formed. Even if larger stable coalitions are achieved with trade sanctions, implications for global welfare can be adverse, because additional trade distortions trade off with the environmental gains. We identify the USA and Europe as essential members of stable coalitions if outsiders retaliate.

Suggested Citation

  • Hagen, Achim & Schneider, Jan, 2021. "Trade sanctions and the stability of climate coalitions," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    • Handle: RePEc:eee:jeeman:v:109:y:2021:i:c:s0095069621000759
    DOI: 10.1016/j.jeem.2021.102504
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    Cited by:

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    6. Andres, Pia, 2023. "Industrial policy and global public goods provision: rethinking the environmental trade agreement," LSE Research Online Documents on Economics 117899, London School of Economics and Political Science, LSE Library.
    7. Andres, Pia, 2023. "Industrial policy and global public goods provision: rethinking the environmental trade agreement," LSE Research Online Documents on Economics 117900, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    International environmental agreements; Climate clubs; Trade sanctions; Retaliation; Computable general equilibrium;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • F18 - International Economics - - Trade - - - Trade and Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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