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OPEC's Response to International Climate Agreements

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  • Jan Bråten
  • Rolf Golombek

Abstract

This paper studies a game between a group of countries that have agreed to participate in an international climate agreement (the signatories) and OPEC. The purpose of the signatories is to design carbon taxes that maximize their total net income, given a goal on global carbon emissions. As a response to the climate agreement, OPEC imposes an oil tax on its member states that maximizes OPEC's profits. Within a numerical model we find the subgame-perfect equilibrium of a game in which each player chooses when to fix his decision variables. It is shown that in equilibrium the group of signatories chooses to be the leader and OPEC chooses to be the follower. It is demonstrated, however, that for both agents the order of move is of minor (numerical) importance. Hence, the players have limited incentives for strategic behaviour. Copyright Kluwer Academic Publishers 1998

Suggested Citation

  • Jan Bråten & Rolf Golombek, 1998. "OPEC's Response to International Climate Agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 12(4), pages 425-442, December.
    • Handle: RePEc:kap:enreec:v:12:y:1998:i:4:p:425-442
    DOI: 10.1023/A:1008299528789
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    References listed on IDEAS

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    2. Dermot Gately, 1995. "Strategies for OPEC's Pricing and Output Decisions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-38.
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    8. Robert Mabro, 1992. "OPEC and the Price of Oil," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    9. Rolf Golombek & Jan Braten, 1994. "Incomplete International Climate Agreements: Optimal Carbon Taxes, Market Failures and Welfare Effects," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 141-166.
    10. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-948, July.
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    Cited by:

    1. Golombek, Rolf & Brekke, Kjell Arne & Kittelsen, Sverre A.C., 2013. "Is electricity more important than natural gas? Partial liberalizations of the Western European energy markets," Economic Modelling, Elsevier, vol. 35(C), pages 99-111.
    2. repec:old:wpaper:355 is not listed on IDEAS
    3. Barnett, Jon & Dessai, Suraje & Webber, Michael, 2004. "Will OPEC lose from the Kyoto Protocol?," Energy Policy, Elsevier, vol. 32(18), pages 2077-2088, December.
    4. Wood, Peter John, 2010. "Climate Change and Game Theory: a Mathematical Survey," Working Papers 249379, Australian National University, Centre for Climate Economics & Policy.
    5. repec:zbw:hohpro:355 is not listed on IDEAS
    6. Christoph Bohringer, Knut Einar Rosendahl, and Jan Schneider, 2014. "Unilateral Climate Policy: Can OPEC Resolve the Leakage Problem?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).

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