IDEAS home Printed from https://ideas.repec.org/p/fem/femwpa/2009.64.html
   My bibliography  Save this paper

The Incentives to Participate in, and the Stability of, International Climate Coalitions: A Game-theoretic Analysis Using the Witch Model

Author

Listed:
  • Valentina Bosetti

    (Princeton University, FEEM and CMCC)

  • Carlo Carraro

    (University of Venice, FEEM, CEPR, CESifo and CMCC)

  • Enrica De Cian

    (FEEM)

  • Romain Duval

    (OECD)

  • Emanuele Massetti

    (FEEM and CMCC)

  • Massimo Tavoni

    (Princeton University, FEEM and CMCC)

Abstract

This paper uses WITCH, an integrated assessment model with a game-theoretic structure, to explore the prospects for, and the stability of broad coalitions to achieve ambitious climate change mitigation action. Only coalitions including all large emitting regions are found to be technically able to meet a concentration stabilisation target below 550 ppm CO2eq by 2100. Once the free-riding incentives of non-participants are taken into account, only a “grand coalition” including virtually all regions can be successful. This grand coalition is profitable as a whole, implying that all countries can gain from participation provided appropriate transfers are made across them. However, neither the grand coalition nor smaller but still environmentally significant coalitions appear to be stable. This is because the collective welfare surplus from cooperation is not found to be large enough for transfers to offset the free-riding incentives of all countries simultaneously. Some factors omitted from the analysis, which might improve coalition stability, include the co-benefits from mitigation action, the costless removal of fossil fuel subsidies, as well as alternative assumptions regarding countries’ bargaining behaviour.

Suggested Citation

  • Valentina Bosetti & Carlo Carraro & Enrica De Cian & Romain Duval & Emanuele Massetti & Massimo Tavoni, 2009. "The Incentives to Participate in, and the Stability of, International Climate Coalitions: A Game-theoretic Analysis Using the Witch Model," Working Papers 2009.64, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2009.64
    as

    Download full text from publisher

    File URL: http://www.feem.it/userfiles/attach/20091211125749464-09.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Valentina Bosetti & Carlo Carraro & Romain Duval & Alessandra Sgobbi & Massimo Tavoni, 2009. "The Role of R&D and Technology Diffusion in Climate Change Mitigation: New Perspectives Using the WITCH Model," OECD Economics Department Working Papers 664, OECD Publishing.
    2. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    3. Perry, Motty & Reny, Philip J, 1994. "A Noncooperative View of Coalition Formation and the Core," Econometrica, Econometric Society, vol. 62(4), pages 795-817, July.
    4. Richard S.J. Tol, 2008. "Why Worry About Climate Change? A Research Agenda," Environmental Values, White Horse Press, vol. 17(4), pages 437-470, November.
    5. Bosetti, Valentina & Carraro, Carlo & Massetti, Emanuele & Tavoni, Massimo, 2007. "Optimal Energy Investment and R&D Strategies to Stabilise Greenhouse Gas Atmospheric Concentrations," CEPR Discussion Papers 6549, C.E.P.R. Discussion Papers.
    6. Valentina Bosetti & Carlo Carraro & Marzio Galeotti & Emanuele Massetti & Massimo Tavoni, 2006. "WITCH. A World Induced Technical Change Hybrid Model," Working Papers 2006_46, Department of Economics, University of Venice "Ca' Foscari".
    7. Tol, Richard S. J., 2005. "The marginal damage costs of carbon dioxide emissions: an assessment of the uncertainties," Energy Policy, Elsevier, vol. 33(16), pages 2064-2074, November.
    8. Hans-Peter Weikard & Michael Finus & Juan-Carlos Altamirano-Cabrera, 2006. "The impact of surplus sharing on the stability of international climate agreements," Oxford Economic Papers, Oxford University Press, vol. 58(2), pages 209-232, April.
    9. Carraro, Carlo & Marchiori, Carmen & Sgobbi, Alessandra, 2005. "Advances in negotiation theory : bargaining, coalitions, and fairness," Policy Research Working Paper Series 3642, The World Bank.
    10. Carlo Carraro & Johan Eyckmans & Michael Finus, 2006. "Optimal transfers and participation decisions in international environmental agreements," The Review of International Organizations, Springer, vol. 1(4), pages 379-396, December.
    11. Darwin, Roy & Tsigas, Marinos E. & Lewandrowski, Jan & Raneses, Anton, 1995. "World Agriculture and Climate Change: Economic Adaptations," Agricultural Economics Reports 33933, United States Department of Agriculture, Economic Research Service.
    12. Hoel, Michael, 1991. "Global environmental problems: The effects of unilateral actions taken by one country," Journal of Environmental Economics and Management, Elsevier, vol. 20(1), pages 55-70, January.
    13. Ray, Debraj & Vohra, Rajiv, 1997. "Equilibrium Binding Agreements," Journal of Economic Theory, Elsevier, vol. 73(1), pages 30-78, March.
    14. Henry Tulkens & Parkash Chander, 1997. "The Core of an Economy with Multilateral Environmental Externalities," International Journal of Game Theory, Springer;Game Theory Society, vol. 26(3), pages 379-401.
    15. Martin L. Weitzman, 2001. "Gamma Discounting," American Economic Review, American Economic Association, vol. 91(1), pages 260-271, March.
    16. Johan Eyckmans & Michael Finus, 2004. "An Almost Ideal Sharing Scheme for Coalition Games with Externalities," Energy, Transport and Environment Working Papers Series ete0414, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
    17. Solow, Robert M, 1974. "The Economics of Resources or the Resources of Economics," American Economic Review, American Economic Association, vol. 64(2), pages 1-14, May.
    18. Kalyan Chatterjee & Bhaskar Dutia & Debraj Ray & Kunal Sengupta, 2013. "A Noncooperative Theory of Coalitional Bargaining," World Scientific Book Chapters,in: Bargaining in the Shadow of the Market Selected Papers on Bilateral and Multilateral Bargaining, chapter 5, pages 97-111 World Scientific Publishing Co. Pte. Ltd..
    19. Michael Hoel & Kerstin Schneider, 1997. "Incentives to participate in an international environmental agreement," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 9(2), pages 153-170, March.
    20. Francesco Bosello & Barbara Buchner & Carlo Carraro, 2003. "Equity, Development, and Climate Change Control," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 601-611, 04/05.
    21. Santiago J. Rubio & Alistair Ulph, 2006. "Self-enforcing international environmental agreements revisited," Oxford Economic Papers, Oxford University Press, vol. 58(2), pages 233-263, April.
    22. Juan-Carlos Altamirano-Cabrera & Michael Finus, 2006. "Permit trading and stability of international climate agreements," Journal of Applied Economics, Universidad del CEMA, vol. 9, pages 19-48, May.
    23. Petrakis, Emmanuel & Xepapadeas, Anastasios, 1996. "Environmental consciousness and moral hazard in international agreements to protect the environment," Journal of Public Economics, Elsevier, vol. 60(1), pages 95-110, April.
    24. 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.
    25. William D. Nordhaus, 2006. "The "Stern Review" on the Economics of Climate Change," NBER Working Papers 12741, National Bureau of Economic Research, Inc.
    26. 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.
    27. Romain Duval & Christine de la Maisonneuve, 2009. "Long-Run GDP Growth Framework and Scenarios for the World Economy," OECD Economics Department Working Papers 663, OECD Publishing.
    28. Donsimoni, Marie-Paule & Economides, Nicholas S & Polemarchakis, Herakles M, 1986. "Stable Cartels," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 317-327, June.
    29. Johannes Bollen & Bruno Guay & Stéphanie Jamet & Jan Corfee-Morlot, 2009. "Co-Benefits of Climate Change Mitigation Policies: Literature Review and New Results," OECD Economics Department Working Papers 693, OECD Publishing.
    30. 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.
    31. Bosello, Francesco & Buchner, Barbara & Carraro, Carlo & Raggi, Davide, 2003. "Can Equity Enhance Efficiency? Some Lessons from Climate Negotiations," CEPR Discussion Papers 3606, C.E.P.R. Discussion Papers.
    32. Richard Tol, 2002. "Estimates of the Damage Costs of Climate Change. Part 1: Benchmark Estimates," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(1), pages 47-73, January.
    33. Moldovanu, Benny, 1992. "Coalition-proof nash equilibria and the core in three-player games," Games and Economic Behavior, Elsevier, vol. 4(4), pages 565-581, October.
    34. Jean-Marc Burniaux & Jean Château & Rob Dellink & Romain Duval & Stéphanie Jamet, 2009. "The Economics of Climate Change Mitigation: How to Build the Necessary Global Action in a Cost-Effective Manner," OECD Economics Department Working Papers 701, OECD Publishing.
    35. Armando Gomes, 2005. "Multilateral Contracting with Externalities," Econometrica, Econometric Society, vol. 73(4), pages 1329-1350, July.
    36. Carlo Carraro, 1997. "Modelling International Policy Games: Lessons from European Monetary Coordination," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 24(3), pages 163-177, October.
    37. Bosetti, Valentina & Carraro, Carlo & Massetti, Emanuele & Sgobbi, Alessandra & Tavoni, Massimo, 2009. "Optimal energy investment and R&D strategies to stabilize atmospheric greenhouse gas concentrations," Resource and Energy Economics, Elsevier, vol. 31(2), pages 123-137, May.
    38. Jean-Marc Burniaux & Jean Château & Romain Duval & Stéphanie Jamet, 2008. "The Economics of Climate Change Mitigation: Policies and Options for the Future," OECD Economics Department Working Papers 658, OECD Publishing.
    39. Daniel J. Seidmann & Eyal Winter, 1998. "A Theory of Gradual Coalition Formation," Review of Economic Studies, Oxford University Press, vol. 65(4), pages 793-815.
    40. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
    41. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
    42. Keller, Klaus & Bolker, Benjamin M. & Bradford, D.F.David F., 2004. "Uncertain climate thresholds and optimal economic growth," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 723-741, July.
    43. Hanemann, W. Michael, 2008. "What is the Economic Cost of Climate Change?," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt9g11z5cc, Department of Agricultural & Resource Economics, UC Berkeley.
    44. Barrett, Scott, 2001. "International cooperation for sale," European Economic Review, Elsevier, vol. 45(10), pages 1835-1850, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gersbach, Hans & Hummel, Noemi, 2016. "A development-compatible refunding scheme for a climate treaty," Resource and Energy Economics, Elsevier, vol. 44(C), pages 139-168.
    2. Carlo Carraro, 2009. "The Road to Copenhagen: What Agreement Can Actually Be Effective and Stable? by Carlo Carraro," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(3), pages 30-36, October.
    3. Herve Moulin & Indrajit Ray & Sonali Sen Gupta, 2013. "Coarse Correlated Equilibria in an Abatement Game," Discussion Papers 13-11, Department of Economics, University of Birmingham.
    4. Bosetti, Valentina & Carraro, Carlo & De Cian, Enrica & Massetti, Emanuele & Tavoni, Massimo, 2013. "Incentives and stability of international climate coalitions: An integrated assessment," Energy Policy, Elsevier, vol. 55(C), pages 44-56.
    5. Carlo Carraro & Francesco Bosello & Enrica De Cian, 2009. "An Analysis of Adaptation as a Response to Climate Change," Working Papers 2009_26, Department of Economics, University of Venice "Ca' Foscari".
    6. Hans Gersbach & Noemi Hummel & Ralph Winkler, 2011. "Sustainable Climate Treaties," Diskussionsschriften dp1105, Universitaet Bern, Departement Volkswirtschaft.
    7. Stine Aakre, 2016. "The political feasibility of potent enforcement in a post-Kyoto climate agreement," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 16(1), pages 145-159, February.
    8. Fabio Sferra & Massimo Tavoni, 2013. "Endogenous Participation in a Partial Climate Agreement with Open Entry: A Numerical Assessment," Working Papers 2013.60, Fondazione Eni Enrico Mattei.
    9. Massetti, Emanuele & Tavoni, Massimo, 2012. "A developing Asia emission trading scheme (Asia ETS)," Energy Economics, Elsevier, vol. 34(S3), pages 436-443.

    More about this item

    Keywords

    Climate Policy; Climate Coalition; Game Theory; Free Riding;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2009.64. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah). General contact details of provider: http://edirc.repec.org/data/feemmit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.