Are international environmental agreements stable ex-post?

Beard, Rodney and Mallawaarachchi, Thilak (2011): Are international environmental agreements stable ex-post?

Abstract

In this paper we present a model of international environmental agreements in the presence of threshold effects. The model is in the tradition of models of international environmental agreements formulated as games in partition function form. Games in partition function form allow the incorporation of external effects between players. The model is applied to global climate change agreements. The agreement involves a contract between nations as to the level of abatement of greenhouse gas emissions and how these benefits are to be shared. Benefits to emissions abatement are subject to a threshold. Consequently, we model climate as a global threshold public good. This allows a mechanism to explore incentives and disincentives for signing agreements consequent to a critical number of other players committing to an agreement. We show that thresholds may destabilize what would be an otherwise stable agreement and that combining an emissions tax with an international agreement can be used to restore stability.

• Item Type: MPRA Paper
• Language: English
• Keywords: International environmental agreements; threshold public good; gamma core, global warming and emissions taxation
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C71 - Cooperative Games; H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies

References

Barrett, S. (1994) Self-enforcing international environmental agreements, Oxford Economic Papers 46: 878-894.

Cararro, C., Marchiori, C. and Oreffice, S. (2004) Endogenous minimum participation in international environmental treaties, Centre for Economic Policy Research, Discussion paper no. 4281.

Cararraro, C. and Siniscalco, D. (1993) Strategies for the international protection of the environment, Journal of Public Economics Vol. 52, no. 3., pp. 309-328.

Bergemann, D. and Morris, S. (2004) Robust mechanism design, Econometrica, Vol. 73, No.6, pp. 1771-1813.

Bergemann, D. and Morris, S. (2008) Ex-post implementation, Games and Economic Behavior, Vol. 63, pp. 527-566.

Bergemann, D., & Morris, S. (2009). Robust Implementation in Direct Mechanisms. Review of Economic Studies, 76(4), 1175-1204.

Chander, P. (2007) The gamma-core and coalition formation, International journal of game theory 35:539–556.

Chander, P. and Tulkens, H. (1997) The core of an economy with multilateral environmental externalities, International Journal of Game Theory 26:379-401.

Chander, P. and Tulkens, H. (2006) Cooperation, stability and self-enforcement in international environmental agreements: A conceptual discussion, CORE DISCUSSION PAPER N° 2006/03.

Fuentes-Albero, C., & Rubio, S. J. (2010). Can international environmental cooperation be bought? European Journal of Operational Research, 202(1), 255-264.

Helm,C. (2001) On the existence of a cooperative solution for a coalitional game with externalities, International Journal of Game Theory, 30: 141-146.

McQuillin, B. (2008) The extended and generalized Shapley value:simultaneous consideration of coalitional externalities and coalitional structure, MPRA paper No. 12409, December 2008.

Osborne, M. and Rubinstein, A. A course in game theory, MIT press 1994.

Pavlova, Y. (2008) Multistage coalition formation game of a self-enforcing international environmental agreement, Jyväskylä studies in computing, No. 94, University of Jyväskylä.

R.M.Thrall and W.F. Lucas (1963) N-person games in partition function form, Naval Research Logistics Quarterly 10, pp. 281-298.