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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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    File URL: http://www.wiwi.uni-siegen.de/vwl/repec/sie/papers/156-12.pdf
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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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    3. 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.
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    5. Barrett, Scott, 1997. "The strategy of trade sanctions in international environmental agreements," Resource and Energy Economics, Elsevier, vol. 19(4), pages 345-361, November.
    6. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-894, Supplemen.
    7. 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.
    8. 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.
    9. 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.
    10. Barrett, Scott, 2001. "International cooperation for sale," European Economic Review, Elsevier, vol. 45(10), pages 1835-1850, December.
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    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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