The impact of surplus sharing on the stability of international climate agreements

This paper analyses stability of coalitions for greenhouse gas abatement under different sharing rules applied to the gains from cooperation. We use a 12-region model to examine internal and external stability of coalitions. We determine and compare stable coalitions under different surplus sharing...

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Bibliographic Details
Published in:Oxford economic papers 2006-04, Vol.58 (2), p.209-232
Main Authors: Weikard, Hans-Peter, Finus, Michael, Altamirano-Cabrera, Juan-Carlos
Format: Article
Language:English
Subjects:
Agreements
Carbon dioxide emissions
Climate change
Climate change policy
Climate policy
Cooperation
Cost estimates
D63
Economic analysis
Economic models
emission permits
Emissions
Emissions reduction
environmental agreements
Environmental economics
Environmental policy
Environmental quality
Games
Greenhouse effect
Impact analysis
International
International agreements
International cooperation
International economics
JEL classification: D62
Marginal abatement costs
Marginal benefits
Pollutant emissions
Pollution
Pollution control
Q25
Sharing
Social sciences
Studies
Success
Treaties
Welfare
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Summary:This paper analyses stability of coalitions for greenhouse gas abatement under different sharing rules applied to the gains from cooperation. We use a 12-region model to examine internal and external stability of coalitions. We determine and compare stable coalitions under different surplus sharing rules; for example, grandfathering (sharing proportional to current emissions) and a number of equitable rules, i.e. sharing according to historical responsibilities for past emissions. Due to strong free-rider incentives we find only small stable coalitions for all sharing rules examined. We observe that stable coalitions consist of regions with low marginal abatement costs that are attractive partners in any coalition and regions receiving the highest shares of the surplus from cooperation under a particular sharing rule. We find that equitable rules may not be conducive to success: in fact, a grandfathering scheme leads to the most successful coalition in terms of global abatement and global welfare.
ISSN:0030-7653
1464-3812
DOI:10.1093/oep/gpi047