Incentives and stability of international climate coalitions: An integrated assessment

Abstract

This paper analyses the incentives to participate in an international climate agreement and the stability of the resulting climate coalition using the integrated assessment model WITCH. Coalition stability is assessed under alternative assumptions concerning the pure rate of time preference, the aggregation of social welfare, and the severity of climate damages. The profitability, stability, and strong potential internal stability of a number of coalitions, those potentially effective in reducing GHG emissions, is explored in the paper. The main conclusion is that only the grand coalition, i.e. a coalition where all world regions cooperate to reduce emissions, can maintain GHG concentration below 550ppm CO2-eq. However, this coalition is not internally stable, even when allowing for monetary transfers across world regions. Nonetheless, the paper also shows that strongly potentially internally stable coalitions exist, though of smaller size, which can mitigate global warming and limit GHG concentrations to 600ppm CO2-eq.