Stable International Environmental Agreements: Large Coalitions that Achieve Little

Rauscher Rauscher

doi:10.3390/g10040047

Abstract

A standard result of coalition formation games is that stable coalitions are very small if the coalition plays Nash vis-à-vis the rest of the world and if abatement costs are quadratic. It has been shown that larger coalitions and even the grand coalition are possible if the marginal abatement cost is concave. The paper confirms this result, but shows that abatement activities by large coalitions smaller than the grand coalition can be very small. This can be ‘repaired’ only by assuming that the marginal abatement cost curve changes its curvature extremely once the stable coalition has been reached.

Highlights

The literature on international environmental agreements (IEAs) is huge
See Barrett [1], Carraro/Siniscalco [2], and Finus ([3], ch. 13). This view was challenged by Karp/Simon [4], who showed in a model with more general abatement cost functions that larger coalitions can be stable and even the grand coalition is feasible if the marginal cost of abatement is not linear, but concave
S to As substantially larger than one and since such a factor is applied at every entry of a new signatory into the IEA, the abatement level must be very small for coalitions smaller than the grand coalition

Summary

Introduction

The literature on international environmental agreements (IEAs) is huge. Some of its major results are, disappointing to those who hope that climate change might be mitigated via global cooperation. The present paper builds on their model and shows that large stable coalitions achieve only little abatement compared to what is globally desirable. The two effects almost cancel out and the coalition does only little additional abatement Another way of achieving large coalitions in static games is the Chander/Tulkens [6,7] model of the core, where all countries switch to their non-cooperative Nash strategies if any country leaves the grand coalition. This paper uses a parameterized version of the Karp/Simon model to derive an additional result: if a large stable coalition exists but is smaller than the grand coalition, its abatement is small—possibly even negligibly small. The underlying reason is that in order to generate an incentive for an additional country to enter such a coalition, the coalition members must increase their abatement by a multiple. There will be a short summary and conclusion, including some remarks on empirical relevance

Analysis

Interpretation

Modifications of the Model

Summary and Conclusions