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International Trade and the Negotiability of Global Climate Change Agreements

  • Yuezhou Cai
  • Raymond Riezman
  • John Whalley

Country incentives to participate in cooperative arrangements which either fully or partially internalize climate change externalities from carbon emissions involve critical asymmetries. Small countries trade off own country costs of carbon mitigation actions against their own benefits from global improvements in climate which benefit all. Small countries thus have limited incentive to participate as their actions, while costly to them, have a significant impact on global temperature change which mainly benefits others. Here we build on the work of Shapley and Shubik (1969) which suggests that the core of a global warming game without transferable utility may be empty and use numerical simulation methods to analyse country incentives to participate in carbon emission limitation negotiations using a micro global warming structure related to that used by Uzawa(2003).We discuss how the presence of international trade in goods affects the willingness of countries to join international negotiations on climate change. We calibrate our simulation structure to business as usual scenarios for the period 2006-2036. We go significantly beyond the PAGE model relied on in the Stern (2006) report in capturing multi-country interactive effects on the benefit side of climate change mitigation. We show how the perceived severity of global climate change damage influences participation decisions, and importantly how international trade makes participation more likely.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14711.

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Date of creation: Feb 2009
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Publication status: published as Economic Modelling Volume 33, July 2013, Pages 421–427 Cover image International trade and the negotiability of global climate change agreements ☆ Yuezhou Caia, Raymond Riezmanb, c, John Whalleyd, e
Handle: RePEc:nbr:nberwo:14711
Note: EEE
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  1. Zhiqi Chen, 1997. "Can Economic Activities Lead to Climate Chaos? An Economic Analysis on Global Warming," Canadian Journal of Economics, Canadian Economics Association, vol. 30(2), pages 349-66, May.
  2. Chen, Zhiqi, 1997. "Negotiating an Agreement on Global Warming: A Theoretical Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 170-188, February.
  3. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen.
  4. Herbert E. Scarf, 1965. "The Core of an N Person Game," Cowles Foundation Discussion Papers 182R, Cowles Foundation for Research in Economics, Yale University.
  5. repec:cup:cbooks:9780521066594 is not listed on IDEAS
  6. Hirofumi Uzawa, 1999. "Global warming as a cooperative game," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 2(1), pages 1-37, March.
  7. John Whalley, 1984. "Trade Liberalization among Major World Trading Areas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262231204, June.
  8. Shapley, Lloyd S & Shubik, Martin, 1969. "On the Core of an Economic System with Externalities," American Economic Review, American Economic Association, vol. 59(4), pages 678-84, Part I Se.
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