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Global Environmental Agreements and International Trade: Asymmetry of Countries Matters

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  • Eichner, Thomas
  • Pethig, Rudiger

Abstract

We investigate the formation of global climate agreements (stable grand climate coalitions) in a model, in which climate policy takes the form of carbon emission taxation and fossil fuel and consumption goods are traded on world markets. We expand the model of Eichner and Pethig (2015a) by considering countries that are identical within each of two groups but differ across groups with respect to climate damage or fossil fuel demand. Our numerical analysis suggests that climate damage asymmetry tends to discourage cooperation in the grand coalition. The effects of fuel-demand asymmetry depend on fossil fuel abundance. If fuel is very abundant, the grand coalition fails to be stable independent of the degree of fuel-demand asymmetry. If fuel is sufficiently scarce, low degrees of fuel-demand asymmetry discourage cooperation whereas higher degrees of asymmetry stabilize the grand coalition.

Suggested Citation

  • Eichner, Thomas & Pethig, Rudiger, 2018. "Global Environmental Agreements and International Trade: Asymmetry of Countries Matters," Strategic Behavior and the Environment, now publishers, vol. 7(3-4), pages 281-316, February.
    • Handle: RePEc:now:jnlsbe:102.00000085
    DOI: 10.1561/102.00000085
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    Cited by:

    1. Eichner, Thomas & Pethig, Rüdiger, 2018. "Self-enforcing Biodiversity Agreements with Financial Support from North to South," Ecological Economics, Elsevier, vol. 153(C), pages 43-55.
    2. Soham Baksi & Amrita RayChaudhuri, 2025. "Imperfect Competition, Border Carbon Adjustments, and Stability of a Global Climate Agreement," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 12(3), pages 527-564.
    3. Tibor Besedeš & Erik P. Johnson & Xinping Tian, 2020. "Economic determinants of multilateral environmental agreements," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(4), pages 832-864, August.
    4. Thomas Eichner & Rüdiger Pethig, 2014. "Forging a global environmental agreement through trade sanctions on free riders?," Volkswirtschaftliche Diskussionsbeiträge 171-14, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    5. Balogh, Jeremiás Máté, 2021. "A kereskedelmi megállapodások szerepe a klímaváltozásban. Szakirodalmi áttekintés [The role of trade agreements in climate change. Systematic literature review]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 540-563.

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    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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