Environmental Coalitions with Heterogeneous Countries: Burden-Sharing and Carbon Leakage

Fondazione Eni Enrico Mattei Working Paper No. 24.98

31 Pages Posted: 24 Sep 1998

See all articles by Michele Botteon

Michele Botteon

GRETA and University of Venice

Carlo Carraro

Ca' Foscari University of Venice; CMCC - Euro Mediterranean Centre for Climate Change (Climate Policy Division); IPCC; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Centre for European Policy Studies, Brussels; Green Growth Knowledge Platform

Date Written: September 1997

Abstract

In this paper a simple model is used to analyse the strategic behaviour of countries that bargain over CO2 emission reductions. Five main world regions are considered and their incentives to sign an international agreement on climate change control are analysed. A non-cooperative approach to coalition formation is used to analyse profitability and stability of the agreement. The main focus of the paper is on the role of carbon leakage. On the one hand, by offsetting the effort of signatory countries, carbon leakage reduces the size of the equilibrium coalition and even the likelihood of a successful negotiation. On the other hand, by increasing the profitability of large coalitions, carbon leakage may stabilise agreements signed by many countries. The paper shows that both the size of leakage and the burden-sharing rule used to share the gains from cooperation among signatory countries are crucial variables which explain the type and size of the equilibrium coalitions.

JEL Classification: Q28, Q38

Suggested Citation

Botteon, Michele and Carraro, Carlo, Environmental Coalitions with Heterogeneous Countries: Burden-Sharing and Carbon Leakage (September 1997). Fondazione Eni Enrico Mattei Working Paper No. 24.98, Available at SSRN: https://ssrn.com/abstract=128588 or http://dx.doi.org/10.2139/ssrn.128588

Michele Botteon

GRETA and University of Venice

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Carlo Carraro (Contact Author)

Ca' Foscari University of Venice ( email )

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