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North–South Negotiations on Emission Reductions: A Bargaining Approach

Author

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  • Dapeng Cai

    () (Nanzan University)

  • Jie Li

    () (Jinan University)

Abstract

Abstract This article models North–South negotiations on emission reductions, where the North provides side payments in exchange for the South’s adoption of a more stringent emission standard. We find that depending on where firms compete, strong asymmetry among regions (the two regions’ different valuations of side payments and climate change damage) can produce self-enforcing cooperative agreements. Moreover, the South’s optimal standard choice can be one of two polar cases, i.e., either the “cleanest” or the “dirtiest,” irrespective of the continuum of standards available. The results above can also hold true when both parties bargain over the South’s emission tax.

Suggested Citation

  • Dapeng Cai & Jie Li, 2018. "North–South Negotiations on Emission Reductions: A Bargaining Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(1), pages 157-177, September.
  • Handle: RePEc:kap:enreec:v:71:y:2018:i:1:d:10.1007_s10640-017-0141-8
    DOI: 10.1007/s10640-017-0141-8
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    References listed on IDEAS

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    Keywords

    Emission reductions; Bargaining; Side payments; North–South negotiation; Abatement technology; Emission tax;

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • F18 - International Economics - - Trade - - - Trade and Environment
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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