Can the International Environmental Cooperation Be Bought?

Abstract

In this paper a two-stage game of international environmental agreement formation with asymmetric countries is solved. The equilibrium of the game allows to determine the number of countries interested in signing the agreement. Two cases are studied. In the first case, it is assumed that the only difference among countries is given by the abatement costs, and in the second case, by the environmental damages. In both cases, two different institutional settings, one without side payments and another with side payments, are considered. The results establish that the asymmetry assumption has no important effects on the scope of cooperation in comparison with the symmetric case if side payments are not used or the only difference among countries is given by the abatement costs. When the only difference are the environmental damages, the result is that the level of cooperation that can be bought through a self-financed side payment system increases with the degree of asymmetry.