Abstract
This paper investigates which drivers affect the formation and stability of international climate agreements (ICAs). The applied model STACO is used to project costs and benefits of an international agreement on climate change mitigation activities. The simulation results show that an incentive-based permit allocation scheme is an essential driver in stabilizing larger coalitions. Regional damage shares turn out to be another driver of coalition formation but global damages do not seem to be, thus illustrating that international coalition formation is a matter of relative costs and benefits across regions. No allocation scheme can, however, assure the stability of a global agreement due to huge free-rider incentives. This requires alternative rules, such as a condition that some players are essential in a coalition, or accepting a small loss from cooperation.
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