Comparison of Farsightedly Stable Climate Coalitions in Different Time Horizons

Abstract

Game theory is used to investigate the formation of farsightedly stable climate coalitions in different time horizons. The integrated assessment model FUND provides data for different time horizons as well as the per-member partition cost-benefit function of pollution abatement. This allows the comparison of farsightedly stable climate coalitions in relation to their improvement to environmental quality and welfare for different time horizons. The amount of farsightedly stable climate coalitions is large, particularly for last time horizons, and this indicates that there are a lot of countries, which have economic incentives to join climate agreements like the Paris agreements in a “farsighted world.” The farsighted stability is not robust with respect to small changes in variables which determine it. In order to have longstanding farsightedly stable climate coalitions for different time horizons, one needs to maintain the emissions of each coalition member and the changes of marginal benefits from pollution abatement among coalition members as small as possible. However, the marginal costs and benefits from pollution abatement are governed by economic structure and environmental damages in each country, which cannot be influenced. Furthermore, the members and size of farsightedly stable climate coalitions are very fragile to the emission changes of certain coalition members from 1-year horizon to the next one. Then, it results that farsightedly stable climate coalitions cannot be maintained for long terms, which indicates that the “egoistic farsighted world” cannot assure lasting big international climate agreements.