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Self-Enforcing Environmental Agreements and International Trade

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  • Thomas Eichner
  • Rüdiger Pethig

Abstract

In the basic model of the literature on international environmental agreements (IEAs) (Barrett 1994; Rubio and Ulph 2006) the number of signatories of self-enforcing IEAs does not exceed three, if non-positive emissions are ruled out. We extend that model by introducing a composite consumer good and fossil fuel that are produced and consumed in each country and traded on world markets. When signatory countries act as Stackelberg leader and emissions are positive, the size of stable IEAs may be significantly larger in our model with international trade. This would be good news if larger self-enforcing IEAs would lead to stronger reductions of total emissions. Unfortunately, in the presence of self-enforcing IEAs total emissions turn out to be only slightly less than in the business as usual scenario, independent of the number of signatories. We also investigate the role of international trade by comparing our free-trade results with the outcome in the regime of autarky. Our autarky model turns out to coincide with the basic model of the literature alluded to above. We contribute to that literature by showing that in autarky the outcome of self-enforcing IEAs is also almost the same as in business as usual.

Suggested Citation

  • Thomas Eichner & Rüdiger Pethig, 2013. "Self-Enforcing Environmental Agreements and International Trade," CESifo Working Paper Series 4125, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4125
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    References listed on IDEAS

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    1. Effrosyni Diamantoudi & Eftichios S. Sartzetakis, 2006. "Stable International Environmental Agreements: An Analytical Approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(2), pages 247-263, May.
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    5. Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
    6. Carbone, Jared C. & Helm, Carsten & Rutherford, Thomas F., 2009. "The case for international emission trade in the absence of cooperative climate policy," Journal of Environmental Economics and Management, Elsevier, vol. 58(3), pages 266-280, November.
    7. Carraro, Carlo & Siniscalco, Domenico, 1993. "Strategies for the international protection of the environment," Journal of Public Economics, Elsevier, vol. 52(3), pages 309-328, October.
    8. Barrett, Scott, 1997. "The strategy of trade sanctions in international environmental agreements," Resource and Energy Economics, Elsevier, vol. 19(4), pages 345-361, November.
    9. Kolstad, Charles D., 2007. "Systematic uncertainty in self-enforcing international environmental agreements," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 68-79, January.
    10. Barrett, Scott, 2001. "International cooperation for sale," European Economic Review, Elsevier, vol. 45(10), pages 1835-1850, December.
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    Citations

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    Cited by:

    1. Antoine Cazals & Alexandre Sauquet, 2013. "When does cooperation win and why? Political cycles and participation in international environmental agreements," Working Papers halshs-00903653, HAL.
    2. 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.
    3. Eichner, Thomas & Pethig, Rüdiger, 2017. "Trade in fossil fuel deposits for preservation and strategic action," Journal of Public Economics, Elsevier, vol. 147(C), pages 50-61.
    4. 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.
    5. By Thomas Eichner & Rüdiger Pethig, 2015. "Self-enforcing international environmental agreements and trade: taxes versus caps," Oxford Economic Papers, Oxford University Press, vol. 67(4), pages 897-917.
    6. repec:eee:jeeman:v:85:y:2017:i:c:p:1-20 is not listed on IDEAS
    7. Thomas Eichner & Rüdiger Pethig, 2012. "Stable climate coalitions (Nash) and international trade," Volkswirtschaftliche Diskussionsbeiträge 155-12, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    8. Eichner, Thomas & Pethig, Rüdiger, 2017. "Self-enforcing environmental agreements and trade in fossil energy deposits," Journal of Environmental Economics and Management, Elsevier, vol. 85(C), pages 1-20.
    9. Effrosyni Diamantoudi & Eftichios Sartzetakis & Stefania Strantza, 2018. "International Environmental Agreements and Trading Blocks - Can issue linkage enhance cooperation?," Discussion Paper Series 2018_07, Department of Economics, University of Macedonia, revised Jun 2018.
    10. David M. McEvoy & John K. Stranlund, 2016. "Inequality Aversion and Coalition Formation," Working Papers 16-09, Department of Economics, Appalachian State University.
    11. Helm, Carsten & Schmidt, Robert C., 2015. "Climate cooperation with technology investments and border carbon adjustment," European Economic Review, Elsevier, vol. 75(C), pages 112-130.
    12. Thomas Eichner & Rüdiger Pethig, 2015. "Buy coal for preservation and act strategically on the fuel market," Volkswirtschaftliche Diskussionsbeiträge 178-15, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    13. Thomas Kuhn & Radomir Pestow & Anja Zenker, 2018. "Endogenous Climate Coalitions and Free Trade - Building the Missing Link," Chemnitz Economic Papers 018, Department of Economics, Chemnitz University of Technology.
    14. repec:eee:eecrev:v:99:y:2017:i:c:p:77-92 is not listed on IDEAS
    15. Ngo Van Long, 2014. "The Green Paradox in Open Economies," CESifo Working Paper Series 4639, CESifo Group Munich.
    16. Pethig, Rüdiger & Eichner, Thomas, 2015. "Unilateral mitigation of climate damage via purchase of fossil fuel deposits," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113010, Verein für Socialpolitik / German Economic Association.
    17. Eichner, Thomas & Pethig, Rüdiger, 2014. "Self-enforcing environmental agreements and capital mobility," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 120-132.
    18. Thomas Eichner & Rüdiger Pethig, 2013. "Trade tariffs and self-enforcing environmental agreements," Volkswirtschaftliche Diskussionsbeiträge 161-13, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    19. Thomas Eichner & Rüdiger Pethig, 2015. "Buy coal to mitigate climate damage and benefit from strategic deposit action," Volkswirtschaftliche Diskussionsbeiträge 177-15, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    20. repec:kap:itaxpf:v:24:y:2017:i:4:d:10.1007_s10797-017-9463-2 is not listed on IDEAS
    21. Thomas Kuhn & Radomir Pestow & Anja Zenker, 2017. "Building Climate Coalitions on Preferential Free Trade Agreements," Chemnitz Economic Papers 011, Department of Economics, Chemnitz University of Technology, revised Jul 2017.
    22. Emilson C. D. Silva, 2017. "Self-enforcing agreements under unequal nationally determined contributions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(4), pages 705-729, August.
    23. Miguel A. Meléndez-Jiménez & Arnold Polanski, 2018. "Dirty neighbors: Pollution in an interlinked world," Working Papers 2018-06, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.

    More about this item

    Keywords

    international trade; self-enforcing environmental agreements; Stackelberg equilibrium;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • 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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