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Financial transfers to sustain international cooperation in the climate change framework

  • GERMAIN, Marc


    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

  • VAN YPERSELE, Jean-Pascal


    (Institut d'astronomie et de géophysique Georges Lemaître ( ASTR), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

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    This paper deals with a a cooperative game theoretic analysis of the economics of international agreements on climate change. To cope with the question of the voluntary implementation of the international optimum, a financial transfer scheme is proposed under which no countries nor subgroup (coalition) of countries would have an interest not to join to the international agreement. The transfer scheme presents the originality to be designed in a closed-loop dynamic framework where cooperation is renegotiated at each period taking account of the current stock of pollutant. The transfer scheme is applied to the climate change problem, making use of a simple model inspired by Kverndokk (1994) and Nordhaus and Yang (1996). The results show that with the proposed sidepayments, international cooperation is indeed individually rational and rational in the sense of coalitions.

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    Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1999036.

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    Date of creation: 01 Jun 1999
    Date of revision:
    Handle: RePEc:cor:louvco:1999036
    Contact details of provider: Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)
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    1. de Zeeuw, A.J., 1998. "The acid rain differential game," Other publications TiSEM f6c561bf-c603-4de7-994c-e, Tilburg University, School of Economics and Management.
    2. Veijo Kaitala & Matti Pohjola & Olli Tahvonen, 1992. "Transboundary air pollution and soil acidification: A dynamic analysis of an acid rain game between Finland and the USSR," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 2(2), pages 161-181, March.
    3. Karl-Göran Mäler & Aart De Zeeuw, 1998. "The Acid Rain Differential Game," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(2), pages 167-184, September.
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