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Regional and Sub-Global Climate Blocs.A Game-Theoretic Perspective on Bottom-up Climate Regimes

  • Carlo Carraro

    (University of Venice, Fondazione Eni Enrico Mattei, CEPR and CEPS)

  • Barbara Buchner

    (Fondazione Eni Enrico Mattei)

No international regime on climate change is going to be fully effective in controlling GHG emissions without the involvement of countries such as China, India, the United States, Australia, and possibly other developing countries. This highlights an unambiguous weakness of the Kyoto Protocol, where the aforementioned countries either have no binding emission targets or have decided not to comply with their targets. Therefore, when discussing possible post-Kyoto scenarios, it is crucial to prioritise participation incentives for all countries, especially those without explicit or with insufficient abatement targets. This paper offers a bottom-up game-theoretic perspective on participation incentives. Rather than focusing on issue linkage, transfers or burden sharing as tools to enhance the incentives to participate in a climate agreement, this paper aims at exploring whether a different policy approach could lead more countries to adopt effective climate control policies. This policy approach is explicitly bottom-up, namely it gives each country the freedom to sign agreements and deals, bilaterally or multilaterally, with other countries, without being constrained by any global protocol or convention. This study provides a game-theoretic assessment of this policy approach and then evaluates empirically the possible endogenous emergence of single or multiple climate coalitions. Welfare and technological consequences of different multiple bloc climate regimes will be assessed and their overall environmental effectiveness will be discussed.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2005.21.

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Date of creation: Feb 2005
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Handle: RePEc:fem:femwpa:2005.21
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  1. Carraro, Carlo & Siniscalco, Domenico, 1991. "Strategies for the International Protection of the Environment," CEPR Discussion Papers 568, C.E.P.R. Discussion Papers.
  2. Carraro, Carlo & Marchiori, Carmen, 2002. "Stable Coalitions," CEPR Discussion Papers 3258, C.E.P.R. Discussion Papers.
    • Carlo Carraro & Carmen Marchiori, 2003. "Stable coalitions," Chapters, in: The Endogenous Formation of Economic Coalitions, chapter 5 Edward Elgar.
  3. Buchner, Barbara & Carraro, Carlo, 2004. "Economic and Environmental Effectiveness of a Technology-based Protocol," CEPR Discussion Papers 4412, C.E.P.R. Discussion Papers.
  4. Nordhaus, William D & Yang, Zili, 1996. "A Regional Dynamic General-Equilibrium Model of Alternative Climate-Change Strategies," American Economic Review, American Economic Association, vol. 86(4), pages 741-65, September.
  5. Bond, Eric W. & Syropoulos, Constantinos, 1996. "The size of trading blocs Market power and world welfare effects," Journal of International Economics, Elsevier, vol. 40(3-4), pages 411-437, May.
  6. Debraj Ray & Rajiv Vohra, 1996. "A Theory of Endogenous Coalition Structure," Papers 0068, Boston University - Industry Studies Programme.
  7. Paolo Buonanno & Carlo Carraro & Efrem Castelnuovo & Marzio Galeotti, 2001. "Emission Trading Restrictions with Endogenous Technological Change," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 1(3), pages 379-395, July.
  8. Barbara Buchner & Carlo Carraro & Igor Cersosimo & Carmen Marchiori, 2002. "Back to Kyoto? US Participation and the Linkage between R&D and Climate Cooperation," CESifo Working Paper Series 688, CESifo Group Munich.
  9. Yi, Sang-Seung, 1997. "Stable Coalition Structures with Externalities," Games and Economic Behavior, Elsevier, vol. 20(2), pages 201-237, August.
  10. Joseph E. Aldy & Scott Barrett & Robert N. Stavins, 2003. "Thirteen plus one: a comparison of global climate policy architectures," Climate Policy, Taylor & Francis Journals, vol. 3(4), pages 373-397, December.
  11. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
  12. Robert Reinstein, 2004. "A Possible Way Forward on Climate Change," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 9(3), pages 245-309, July.
  13. Ray, Debraj & Vohra, Rajiv, 1997. "Equilibrium Binding Agreements," Journal of Economic Theory, Elsevier, vol. 73(1), pages 30-78, March.
  14. EYCKMANS, Johan & TULKENS, Henry, 1999. "Simulating coalitionally stable burden sharing agreements for the climate change problem," CORE Discussion Papers 1999026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. Alan S. Manne & Richard G. Richels, 1999. "The Kyoto Protocol: A Cost-Effective Strategy for Meeting Environmental Objectives?," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 1-23.
  16. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen.
  17. Alessandra Casella, 1995. "Large Countries, Small Countries, and the Enlargement of Trade Blocs," NBER Working Papers 5365, National Bureau of Economic Research, Inc.
  18. Bloch, Francis, 1996. "Sequential Formation of Coalitions in Games with Externalities and Fixed Payoff Division," Games and Economic Behavior, Elsevier, vol. 14(1), pages 90-123, May.
  19. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn.
  20. Buchner, Barbara & Carraro, Carlo & Cersosimo, Igor, 2002. "On the Consequences of the US Withdrawal from the Kyoto/Bonn Protocol," CEPR Discussion Papers 3239, C.E.P.R. Discussion Papers.
  21. Sang-Seung Yi, 1996. "Open Regionalism and World Welfare," Eastern Economic Journal, Eastern Economic Association, vol. 22(4), pages 467-475, Fall.
  22. BLOCH, Francis & FERRER, Hélène, 1999. "Trade fragmentation and coordination in bilateral oligopolies," CORE Discussion Papers 1999008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  23. Buonanno, Paolo & Carraro, Carlo & Galeotti, Marzio, 2003. "Endogenous induced technical change and the costs of Kyoto," Resource and Energy Economics, Elsevier, vol. 25(1), pages 11-34, February.
  24. Warwick J. McKibbin & Peter J. Wilcoxen, 1997. "A Better Way to Slow Global Climate Change," Economics and Environment Network Working Papers 9702, Australian National University, Economics and Environment Network.
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