We investigate the formation of global climate agreements (stable grand climate coalitions) in a model, in which climate policy takes the form of carbon emission taxation and fossil fuel and consumption goods are traded on world markets. We expand the model of Eichner and Pethig (2015a) by considering countries that are identical within each of two groups but differ across groups with respect to climate damage or fossil fuel demand. Our numerical analysis suggests that climate damage asymmetry tends to discourage cooperation in the grand coalition. The effects of fuel-demand asymmetry depend on fossil fuel abundance. If fuel is very abundant, the grand coalition fails to be stable independent of the degree of fuel-demand asymmetry. If fuel is sufficiently scarce, low degrees of fuel-demand asymmetry discourage cooperation whereas higher degrees of asymmetry stabilize the grand coalition.
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12 February 2018
Research Article|
February 12 2018
Global Environmental Agreements and International Trade: Asymmetry of Countries Matters
Thomas Eichner;
Thomas Eichner
Department of Economics,
University of Hagen
, Universitätsstr. 41, 58097 Hagen, Germany
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Rüdiger Pethig
Rüdiger Pethig
Department of Economics,
University of Siegen
, Unteres Schloss 3, 57072 Siegen, Germany
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Financial support from the German Science foundation (DFG grant number EI 847/1-2 and PE 212/9-2) is gratefully acknowledged. Thanks also to two anonymous referees for helpful comments. Remaining errors are the authors’ sole responsibility.
Online ISSN: 1944-0138
Print ISSN: 1944-012X
© 2018 T. Eichner & R. Pethig
2018
T. Eichner & R. Pethig
Licensed re-use rights only
Strategic Behavior and the Environment (2018) 7 (3-4): 281–316.
Citation
Eichner T, Pethig R (2018), "Global Environmental Agreements and International Trade: Asymmetry of Countries Matters". Strategic Behavior and the Environment, Vol. 7 No. 3-4 pp. 281–316, doi: https://doi.org/10.1561/102.00000085
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