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Self-enforcing environmental agreements and international trade

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In the basic model of the literature on international environmental agreements (IEAs) (Barrett 1994; Rubio and Ulph 2006) the number of signatories of selfenforcing 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, the allocation of total emissions in self-enforcing IEAs turns out to be approximately the same as in the business as usual scenario independent of the number of its 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 regime the outcome of self-enforcing IEAs is also approximately the same as in business as usual.

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  • Thomas Eichner & Rüdiger Pethig, 2012. "Self-enforcing environmental agreements and international trade," Volkswirtschaftliche Diskussionsbeiträge 156-12, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
  • Handle: RePEc:sie:siegen:156-12
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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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    4. Copeland, Brian R. & Taylor, M. Scott, 2005. "Free trade and global warming: a trade theory view of the Kyoto protocol," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 205-234, March.
    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, pages 309-328.
    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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    1. Voluntary pollution restrictions do not work
      by Economic Logician in Economic Logic on 2012-10-09 19:17:00

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    Cited by:

    1. David M. McEvoy & John K. Stranlund, 2016. "Inequality Aversion and Coalition Formation," Working Papers 16-09, Department of Economics, Appalachian State University.
    2. 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.
    3. Ngo Van Long, 2014. "The Green Paradox in Open Economies," CESifo Working Paper Series 4639, CESifo Group Munich.
    4. Thomas Eichner & Rüdiger Pethig, 2014. "Global environmental agreements and international trade: Asymmetry of countries matters," Volkswirtschaftliche Diskussionsbeiträge 170-14, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    5. Thomas Eichner & Rüdiger Pethig, 2013. "Trade tariffs and self-enforcing environmental agreements," Volkswirtschaftliche Diskussionsbeiträge 161-13, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    6. repec:kap:itaxpf:v:24:y:2017:i:4:d:10.1007_s10797-017-9463-2 is not listed on IDEAS
    7. 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.
    8. 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.
    9. 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.
    10. repec:eee:jeeman:v:85:y:2017:i:c:p:1-20 is not listed on IDEAS
    11. Thomas Eichner & Rüdiger Pethig, 2012. "Stable climate coalitions (Nash) and international trade," Volkswirtschaftliche Diskussionsbeiträge 155-12, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    12. Alexandre SAUQUET & Antoine CAZALS, 2013. "When does cooperation win and why? Political cycles and participation in international environmental agreements," Working Papers 201320, CERDI.
    13. 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.
    14. Eichner, Thomas & Pethig, Rüdiger, 2017. "Trade in fossil fuel deposits for preservation and strategic action," Journal of Public Economics, Elsevier, pages 50-61.
    15. 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.
    16. Eichner, Thomas & Pethig, Rüdiger, 2014. "Self-enforcing environmental agreements and capital mobility," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 120-132.
    17. 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.
    18. repec:eee:eecrev:v:99:y:2017:i:c:p:77-92 is not listed on IDEAS
    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. 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.

    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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