Supporting Environmental Agreements under Asymmetry and Minimum Participation Rule

This study analyzes the efficiency of external transfers in international environmental agreements (IEAs) with two types of heterogeneous countries differing in abatement benefit or abatement cost parameters. We introduce a minimum participation rule concerning the number of supporters, who commit to transfer welfare to induce all the other countries to form a self-enforcing IEA. The analytical result shows that an equilibrium exists where all countries except supporters become members of the agreement under a certain condition. The simulation results suggest that the higher the heterogeneity in the abatement benefit, the larger the IEA size and the higher the relative gains of IEAs; the degree of heterogeneity in the abatement cost has little impact on the IEA size but contributes to the relative gains of IEAs.