The case of two self-enforcing international agreements for environmental protection

Osmani, Dritan and Tol, Richard (2006): The case of two self-enforcing international agreements for environmental protection.

Abstract

Abstract

Non-cooperative game theoretical models of self-enforcing international environmental agreements (IEAs) that employ the cartel stability concept of d'Aspremont et al. (1983) frequently use the assumption that countries can sign a single agreement only. We modify the assumption by considering two self-enforcing IEAs. Extending a model of Barrett (1994a) on a single self-enforcing IEA, we demonstrate that there are many similarities between one and two self-enforcing IEAs. But in the case of few countries and high environmental damage we show that two self-enforcing IEA work far better than one self-enforcing IEA in terms of both welfare and environmental equality

• Item Type: MPRA Paper
• Institution: Max Planck Research School on Earth System Modelling (IMPRS-ESM), Research Unit Sustainability and Global Change (FNU), Hamburg University, and Centre for Marine and Atmospheric Science
• Language: English
• Keywords: Keywords: self-enforcing international environmental agreements; non-cooperative game the- ory; stability; nonlinear optimization
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis; H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods

References

[AFHM] Asheim, B.G, Froyn, B.C, Hovi. J, Menz, C.F. (2006) Regional versus Global Cooper- ation for Climate Control Journal of Environmental Economics and Management 51, 92-109.

[AJGW] D'Aspremont, C.A, Jacquemin, J, Gabszeweiz, J, Weymark, J.A. (1983) On the Stability of Collusive Price Leadership Canadian Journal of Economics 16, 17-25.

[B] Barrett, S. (1992) On the Nature and Signifcance of International Environmental Agreements Pethig, R. ed., Conficts and Cooperation in Managing Environmental Resources, Springer-Verlag Berlin, 18-33.

[B] Barrett, S. (1992) Convention on Climate Change: Economic Aspects of Negotiations OECD,Paris.

[B] Barrett, S. (1994a) Self-Enforcing International Environmental Agreements Oxford Economic Papers 46, 878-894.

[B] Reprinted in: The Economics of International Environmental Agreements, (1999) Batabyal, A.A. ed., Aldershot, UK, Ashgate.

[B] Barrett, S. (1994b) The Biodiversity Supergame. Environmental and Resource Economics 4,111-122.

[B] Barrett, S. (1997a) Heterogeneous International Environmental Agreements Carraro, C. ed.,International Environmental Agreemens: Strategic Policy Issues, Edward Elgar, Cheltenham, UK, 9-25.

[B] Barrett, S. (1997b) The Strategy of Trade Sanctions in International Environmental Agreements. Resource and Energy Economics, 19, 345-361.

[B] Bloch, F. (1995) Endogenous structures of Association in Oligopolies. Rand J. Econ. 26, 537-556.

[B] Bloch, F. (1996) Sequential Formation of Coalitions with Fixed Payo® Division and Externalities. Games Econ. Behav. 14, 90-123.

[B] Bloch, F. (1997) Noncooperative models of coalition formation in games with spillovers. Carraro, C, Siniscalco, D. eds., New Direction in Economic Theory of Environment, Cambridge University Press, Cambridge.

[BC] Botteon, M, Carraro, C. (1997) Burden-Sharing and Coalition Stability in Environmen- tal Negotations with Asymmetric Countries Carraro, C. ed., International Environmental Agreemens: Strategic Policy Issues, Edward Elgar, Cheltenham, UK, 26-55.

[BC] Botteon, M, Carraro, C. (2001) Environmental Coalition with Heteregoneous Countries: Burden-Sharing and Carbon Leakage Alistair, A. ed., Oxford University Press, 38-66.

[BS] Breton, M, Soubeyran, A. (1998) The Interaction between International Environmental and Trade Policies. Carraro, C. ed., International Environmental Agreemens: Strategic Policy Issues, Edward Elgar, Cheltenham, UK, 126-149.

[C] Carraro, C. (1997) The Structure of International Environmental Agreements Paper presented at the FEEM/IPCC/Stanford EMF Conference on "International Environmental Agreements on Climate Change", Venice, 309-328.

[CS] Carraro, C. (2000) The Economics of Coalition Formation Gupta, J, Grubb, M. eds., Climate Change and European Leadership Kluwer Academic Publishers 135-156.

[CEF] Carraro, C, Eyckmans, J, Finus, M. (2005) Optimal Transfers and Participation Decisions in International Environmental Agreements Working Papers FEEM 50.

[CMO] Carraro, C, Marchiori, C, Ore±ce, S. (2001) Endogenous Minimum Participation in International Environmental Treaties. Mimeo, FEEM, Milano.

[CS] Carraro, C, Siniscalco, D. (1991) Strategies for the International Protection of the Environment Working Papers FEEM.

[CS] Carraro, C, Siniscalco, D. (1993) Strategies for the International Protection of the Environment J. Public Econ. 52, 309-328.

[CS] Carraro, C, Siniscalco, D. (1998) International Environmental Agreements: Incentives and Political Economy European Economic Review 42, 561-572.

[CT] Chander, P, Tulkens, H. (1995) A Core-Theoretic Solution for the Design of Cooperative Agreemnets on Transfrontier Pollution International Tax and Public Finance 2, 279-293.

[CT] Chander, P, Tulkens, H. (1997) The Core of an Economy with Multilateral Environmental Externalities International Journal of Game Theory, 379-401.

[DS] Diamantoudi, E, Sartzetakis, E. (2001) Stable International Environmental Agreements: An Analytical Approach University of Aarhus, Working Papers 10.

[EM] Ecchia, G, Mariotti, M. (1998) Coalitions Formation in International Environmental Agreements and Role of Institutions. European Economic Review 42, 573-582.

[E] Endres, A. (1996) Designing a Greenhouse Treaty: Some Economic Problems. Eide, E, van den Bergh. R. eds., Law and Economics of the Environment. Juridisk Forlag, Oslo, 201-224.

[E] Endres, A. (1997) Negotiating a Climate Convention - The Role of Prices and Quantities. International Review of Law and Economics 17, 201-224.

[EF] Endres, A, Finus, M. (2002) Quotas May Beat Taxes in a Global Emission Game. Tax and Public Finance 9, 687-707.

[F] Finus, M. (2003) Stability and Design of International Environmental Agreements: The Case of Global and Transboundary Pollution Folmer, H. and T. Tietenberg eds., International Yearbook of Environmental and Resource Economics, 2003/4, Edward Elgar, Cheltenham, UK, 82-158.

[F] Finus, M. (2004) Modesty pays sometimes Working Papers FEEM 68.

[FR] Finus, M. Rundshagen, B. (1998a) Toward a Positive Theory of Coalition Formation and Endogenous Instrumental Choice in Global Pollution Control. Public Choice 96, 145-186.

[FR] Finus, M. Rundshagen, B. (1998b) Renegotiation- Proof Equilibria in a Global Emission Game when Players are Impatient Environmental and Resource Economics 12, 275-306.

[FR] Finus, M, Rundshagen, B. (2003) Endogenous Coalition Formation in global Pollution Control: A Partition Function Approach. Carraro, C. ed., Endogenous Formation of Economic Coalitions, Edward Elgar, Cheltenham, UK, 199-243.

[H] Hoel, M. (1992) International environmental conventions: the case of uniform reductions of emissions. Environmental and Resource Economics 2 141-159.

[HS] Hoel, M, Schneider. K. (1997) Incentives to Participate in an International Environmental Agreement. Environmental and Resource Economics 9 153-170.

[IPS] Ioannidis. A, Papandreou. A, Sartzetakis. E. (2000) International Environmental Agreements: a Literature Review Working Papers, GREEN.

[JA] Jeppesen, T, Andersen. P. (1998) Commitment and Fairness in Environmental Games. Hanley, N, Folmer. H. eds., Game Theory and the Environment. Edward Elgar, Cheltenham, UK, 65-83.

[K] Katsoulacos, Y. (1997) R & D Spillovers, Cooperation, Subsidies and International Agreements. Carraro, C. ed., International Environmental Negotiations: Strategic Policy Issues. Edward Elgar, Cheltenham, UK, 97-109.

[PX] Petrakis. E, Xepapadeas. A. (1996) Environmental Consciousness and Moral Hazard in International Agreements to Protect the Environment. Journal of Public Economics, 60 95- 110.

[RV] Ray. D, Vohra, R. (1994) Equilibrium Binding Agreements. unpublished manuscript Brown University.

[YS] Yi. S. S, Shin. H. (1995) Endogenous Formation of Coalitions in Oligopoly. Dartmouth College Department of Economics WP No.95-2.

[Yi] Yi. S. S. (1997) Stable Coalition Structures with Externalities. Games and Economic Behavior, 20, 201-237.