Heterogeneous International Agreements - If Per Capita Emission Levels Matter

Abstract

In this paper, we study the incentives for international cooperation if (some) countries prefer a more equitable distribution of per capita emission levels. For countries that differ with respect to their population size, we analyze the impact of such an equity preference first for a bilateral, and then for a multilateral environmental problem. We show that - contrary to the two-country-case - for the latter there is no uniform percentage reduction of emissions that makes all countries better off. Rather, equity oriented countries (for example developing countries) enter a coalition only if they don't have to reduce as much. We demonstrate that a high degree of cooperation in international environmental negotiations can be explained if most countries are interested in equity and are not too different with respect to their per capita levels. If, however, countries differ too much in population size and per capita emissions, generally no coalition will be stable without restrictions on entry into or exit out of a coalition. We show that in such a situation equity-orientation does not improve upon the prospects for cooperation.