Stable International Environmental Agreements Research Articles

Social norms for the stability of international enviromental agreements

<p style='text-indent:20px;'>This paper is devoted to study the stability of international environmental agreements (IEAs) in a pollution abatement context. Countries can decide to cooperate or to defect. Defector countries decide on their abatement levels by minimizing their own total cost whereas, signatory countries decide on their abatement levels by minimizing the aggregate of all cooperators.</p><p style='text-indent:20px;'>In the model, all countries have the same environmental damage instead, respect to the non-environmental cost, we assume that each signatory country has to punish a non-signatory for its behaviour, at some cost to itself (see [<xref ref-type="bibr" rid="b17">17</xref>]). We propose two different cases in which we have that punishment is directly proportional to the level of pollution (see [<xref ref-type="bibr" rid="b6">6</xref>] or not (see [<xref ref-type="bibr" rid="b5">5</xref>]). Punishments can be in the form of trade sanctions or import tariffs, as a measure to encourage cooperation.</p><p style='text-indent:20px;'>We model a differential game in order to determine both the optimal path of the abatement levels and stock pollutant as results of feedback Nash equilibria. Stability conditions, such as internal and external stability, are applied showing that different answers about the size of a stable IEA can be obtained.</p>

Stable International Environmental Agreements: Large Coalitions that Achieve Little

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.

On the farsightedly and myopically stable international environmental agreements

AbstractWe investigate the stability of International Environmental Agreements. The analysis of Chwe is extended by investigating the question how to find farsightedly stable coalitions. The myopic stability concept of d'Aspremont, Jacquemin, Gabszeweiz, and Weymark and the farsighted stability concept of Chwe are compared. Farsighted stability, direct and indirect domination are discussed. Considering of the direct domination, we check for the single‐step stability by comparing the profits of every coalition member after one‐step deviation has occurred, while considering the indirect domination (farsightedness) we check for the multistep stability by comparing the profits of every coalition member after a series of deviations have come to an end. On the contrary, myopic stability assumes that players look only one step ahead. The improvement of farsightedly and myopically stable coalitions to the environment quality and welfare are compared. Only the farsightedly stable coalition improves the welfare and abatement by 20% and 79% in comparison to all three myopically stable coalitions together. Algorithms are developed, which can find all farsightedly stable coalitions structures.Considerations for ManagementTaking into account findings, management considerations may include: Myopically stable coalitions are typically subsets of farsightedly stable coalitions. Farsightedly stable coalitions are the largest stable coalitions without side payments, and bring the biggest improvement in environmental quality and welfare. We predict the formation of coalitions that are bigger than myopically stable but smaller than farsightedly stable coalitions. This conclusion is valid under the assumption that transfers are not allowed.

Adaptation and International Environmental Agreements

We study the impact of collective effort in R&D in adaptation technologies, and also spillover effects on formation and size of stable international environmental agreements (IEAs). Our results suggest that it is possible to have more than one size of stable IEA. We can achieve a superior equilibrium, i.e., the grand coalition, if countries manage to keep knowledge spillovers low and arrange a minimum ratification threshold. This threshold is defined endogenously. We also shed light on the effects of two-sided spillover on global welfare and the size of stable IEAs.

International environmental agreements for local and global pollution

Increasing concerns about climate change have given rise to the formation of International Environmental Agreements (IEAs) as a possible solution to limit global pollution effects. In this paper, we study the stability of IEAs in a repeated game framework where we restrict to strategies which are simple and invariant to renegotiation. Our main contribution is that we characterize necessary and sufficient conditions for stability of an IEA when pollution has both a global and local effect. Local pollution spillovers are represented by a network structure. We find that stable IEAs exist if the network structure is balanced. Too large asymmetries in the degree of local spillovers may, however, lead to non-existence of stable structures. We also discuss the implications of our results for welfare. The generality of our approach allows for several applications, in particular the provision of public goods.

Adaptation and International Environmental Agreements

We study the impact of collective effort in R&D in adaptation technologies, and also spillover effects on formation and size of stable international environmental agreements (IEAs). Our results suggest that it is possible to have more than one size of stable IEA. We can achieve a superior equilibrium, i.e., the grand coalition, if countries manage to keep knowledge spillovers low and arrange a minimum ratification threshold. This threshold is defined endogenously. We also shed light on the effects of two-sided spillover on global welfare and the size of stable IEAs.

International environmental agreements: coordinated action under foresight

We examine the formation of international environmental agreements (IEAs). We extend the existing literature by endogenizing the reaction of the IEA’s members to a deviation by a group of members. We assume that when a group of countries contemplates exiting or joining an agreement, it takes into account the reactions of other countries ignited by its own actions. We identify conditions under which the solution always exists and fully characterize the coalitionally farsighted stable IEAs. The new farsighted IEAs can be much larger than those some of the previous models supported and are always Pareto efficient.

Self-enforcing environmental agreements and international trade

In the basic model of the literature on international environmental agreements (IEAs) (Barrett, 1994; Rubio and Ulph, 2006), the number of signatories of self-enforcing IEAs does not exceed three, if non-positive emissions are ruled out. We extend that model by introducing a composite consumer good and fossil fuel that are produced and consumed in each country and traded on world markets. When signatory countries act as a Stackelberg leader and emissions are positive, the size of stable IEAs may be significantly larger in our model with international trade. This would be good news if larger self-enforcing IEAs would lead to stronger reductions of total emissions. Unfortunately, in the presence of self-enforcing IEAs total emissions turn out to be only slightly less than in the business as usual scenario, independent of the number of signatories. We also investigate the role of international trade by comparing our free-trade results with the outcome in the regime of autarky. Our autarky model turns out to be coincident with the basic model of the literature alluded to above. We contribute to that literature by showing that in autarky the outcome of self-enforcing IEAs is also almost the same as in the business as usual scenario.

Trade Tariffs and Self-Enforcing Environmental Agreements

In the basic model of international environmental agreements (IEAs) (Barrett 1994, Rubio and Ulph 2006) extended by international trade, self- enforcing - or stable - IEAs may comprise up to 60% of all countries (Eichner and Pethig 2013). But these IEAs reduce total emissions only slightly compared to non-cooperation. Here we analyze the capacity of sign-unconstrained tariffs to enhance the size and performance of self-enforcing IEAs. We show that the size of stable IEAs shrinks when climate coalitions are Stackelberg leaders and set tariffs in addition to their cap-and-trade schemes. Surprisingly, these smaller IEAs reduce total emissions more effectively than the larger stable IEAs without tariffs. In the model with tariffs the signatory countries import fossil fuel and their tariff takes the form of a subsidy of fuel consumption and a tax on the production of the consumption good.

Self-Enforcing Environmental Agreements and International Trade

In the basic model of the literature on international environmental agreements (IEAs) (Barrett 1994; Rubio and Ulph 2006) the number of signatories of self-enforcing IEAs does not exceed three, if non-positive emissions are ruled out. We extend that model by introducing a composite consumer good and fossil fuel that are produced and consumed in each country and traded on world markets. When signatory countries act as Stackelberg leader and emissions are positive, the size of stable IEAs may be significantly larger in our model with international trade. This would be good news if larger self-enforcing IEAs would lead to stronger reductions of total emissions. Unfortunately, in the presence of self-enforcing IEAs total emissions turn out to be only slightly less than in the business as usual scenario, independent of the number of signatories. We also investigate the role of international trade by comparing our free-trade results with the outcome in the regime of autarky. Our autarky model turns out to coincide with the basic model of the literature alluded to above. We contribute to that literature by showing that in autarky the outcome of self-enforcing IEAs is also almost the same as in business as usual.

The Effects of the Length of the Period of Commitment on the Size of Stable International Environmental Agreements

This paper extends the standard model of self-enforcing dynamic international environmental agreements by allowing the length of the period of commitment of such agreements to vary as a parameter. It analyzes the pattern of behavior of the size of stable coalitions, the stock of pollution, and the emission rate as a function of the length of the period of commitment. It is shown that the length of the period of commitment can have very significant effects on the equilibrium. At the initial date, numerical simulations reveal that as the length of commitment is increased, the potential gain from cooperation tends to diminish, increasing the incentive to ratify the agreements. This suggests that considerable attention should be given to the determination of the length of such international agreements.

Can Justice and Fairness Enlarge International Environmental Agreements?

The literature on International Environmental Agreements (IEAs) predicts a rather low number of signatories to an IEA. This is in sharp contrast to empirical evidence. As experimental economics provides some evidence for more complex human behavior, extending the theory of IEAs to a broader class of preferences is clearly promising. The present paper shows that where countries’ preferences incorporate justice and fairness there will be a strong incentive for them to choose similar abatement policies within and outside an IEA. Consequently, free-riding at the expense of the signatory states diminishes and participation in an IEA becomes a more successful strategy, so that the size of stable IEAs increases.

A Dynamic Model for International Environmental Agreements

In this paper we develop a model that uses a dynamic framework to analyze the process through which countries join international environmental agreements (IEAs). In the model, while all countries suffer from the same environmental damage as a result of total global emissions, non-signatory countries decide on their emission levels by maximizing their own welfare, whereas signatory countries decide on their emission levels by maximizing the aggregate welfare of all signatory countries. It is assumed that signatory countries will be able to punish non-signatories, at some cost to themselves. When countries decide on their pollution emissions, they account for the evolution of the stock of pollution over time. Moreover, we propose a mechanism to describe how countries reach a stable IEA. The model is able to capture situations characterized by partial cooperation within an IEA that is stable over time. It also captures situations where all countries participate in a stable agreement, and situations where no stable agreement is feasible. Where more than one possibility coexist, the long-term outcome of the game depends on the initial conditions (i.e., the initial number of signatory countries and pollution level).

Toward Farsightedly Stable International Environmental Agreements

AbstractThe stability of International Environmental Agreements (IEA) is analyzed by using game theory. The integrated assessment model FUND provides the cost‐benefit payoff functions of pollution abatement for sixteen different world regions. The farsighted stability concept of Chwe (1994) is used and solved by combinatorial algorithms. Farsighted stability assumes perfect foresight of the players and predicts which coalitions can be formed when players are farsighted. All farsightedly stable coalitions are found, and their improvement to environment and welfare is considerable. The farsightedly stable coalitions are refined further to preferred farsightedly stable coalitions, which are coalitions where the majority of coalition members reach higher profits in comparison with any other farsightedly stable coalitions. Farsightedly stable coalitions contribute more to the improvement of environment and welfare in comparison to D'Aspremont et al.'s (1983) stable ones. Considering multiple farsighted stable coalitions, participation in coalitions for environmental protection is significantly increased, which is an optimistic result of our game theoretical model.

Stability of International Environmental Agreements in leadership model*

International Environmental Agreements (IEAs) are a form of cooperation ratified by countries which can improve the management of shared environmental resources. The authors analyze the stability of International Environmental Agreements in leadership model. In 2006, Diamantoudi & Sartzetakis found that a stable coalition consists of either 2, 3, or 4 members if the number of countries is greater than 4. Their model is reconsidered. It is shown that the size of stable IEAs decreases from 3 to 2 when the total number of countries involved increases. However, a situation that can guarantee 4 to be the size of stable IEAs could not be found.

Dynamic Models for International Environmental Agreements

In this paper we develop a model to analyze, in a dynamic framework, how countries join international environmental agreements (IEAs). In the model, where countries suffer from the same environmental damage as a result of the total global emissions, a non-signatory country decides its emissions by maximizing its own welfare, whereas a signatory country decides its emissions by maximizing the aggregate welfare of all signatory countries. Signatory countries are assumed to be able to punish the non-signatories at a cost. When countries decide on their pollution emissions they account for the evolution of the pollution over time. Moreover, we propose a mechanism to describe how countries reach a stable IEA. The model is able to capture situations with partial cooperation in an IEA stable over time. It also captures situations where all countries participate in a stable agreement, or situations where no stable agreement is feasible. When more than one possibility coexists, the long-term outcome of the game depends on the initial conditions (i.e. the size of the initial group of signatory countries and the pollution level.

Stable International Environmental Agreements: An Analytical Approach

AbstractIn this paper we examine the formation of international environmental agreements (IEAs). We show that the welfare of the signatories does not increase monotonically with respect to the number of signatories. We provide an analytical solution of the leadership model. In particular, we find that if the number of countries is greater than four then there exists a unique stable IEA with either two, three, or four signatories. Furthermore, we show that the welfare of the signatories is almost at its lowest level when the IEA is stable. While in our model each country's choice variable is emissions, we extend our results to the case where the choice variable is abatement efforts.

Stable International Environmental Agreements with a Stock Pollutant, Uncertainty and Learning

In this paper I address the question of how uncertainty about damage costs and the possibility of resolving that uncertainty in the future affects the incentives for countries to join an international environmental agreement. I use a two-period model with a stock pollutant where the number of countries generating pollution can be arbitrarily large. The stability concept employed is such that size of the stable IEA can be anywhere between 2 and the grand coalition of all countries depending on parameter values. The dynamic structure allows two different membership rules for an IEA: fixed (countries commit at the outset to be members for both periods) or variable (countries decide each period whether to join). I show that with fixed membership learning results in at least as high membership and global welfare as no learning (unless both the expected value and variance of damage costs are high). With variable membership, learning leads to higher membership (in the second period) but lower global welfare than no learning. For most parameter values variable membership results in higher global welfare than fixed membership.

Stable International Environmental Agreements: An Analytical Approach

In this paper we examine the formation of International Environmental Agreements (IEAs). We provide an analytical treatment of the main model used in the literature and offer a formal solution of it (which has not been available so far), while we clarify some misconceptions that exist in the literature. We find that the unique stable IEAs consist of either two, three or four signatories if the number of countries is greater than or equal to 5. Furthermore, we show that the welfare of the signatories of a stable IEA is very close to its lowest level vs the welfare of signatories of other non-stable IEAs. While in our model countries' choice variable is emissions, we extend our results to the case where the choice variable is abatement efforts.

The Design of Stable International Environmental Agreements: Economic Theory and Political Economy

International environmental agreements typically strive for the solution of a common property resource dilemma. Since the sovereignty of states precludes external enforcement, international environmental agreements must be self‐enforcing. Game theoretical models explain why rewards and punishments imposed through the environmental externality generally fail to enforce full cooperation. Therefore, environmental treaties incorporate provisions that enhance the incentives for participation such as transfers, sanctions and linkage to other negotiation topics in international politics. Moreover, interaction with markets and governments as well as the rules and procedures adopted in the negotiation process influence the design and the effectiveness of an international environmental agreement.