Incentives and Stability of International Climate Coalitions: An Integrated Assessment

37 Pages Posted: 25 Jan 2012 Last revised: 25 Apr 2012

See all articles by Valentina Bosetti

Valentina Bosetti

Bocconi University; CMCC - Euro Mediterranean Centre for Climate Change

Carlo Carraro

Fondazione Eni Enrico Mattei (FEEM); 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; International Center for Climate Governance

Enrica De Cian

Fondazione Eni Enrico Mattei (FEEM); CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici

Emanuele Massetti

Georgia Institute of Technology; CESifo (Center for Economic Studies and Ifo Institute); CMCC - Euro Mediterranean Centre for Climate Change

Massimo Tavoni

Fondazione Eni Enrico Mattei (FEEM); Princeton University - Princeton Environmental Institute

Multiple version iconThere are 2 versions of this paper

Date Written: January 25, 2012

Abstract

This paper analyses the incentives to participate in and the stability of international climate coalitions. Using the integrated assessment model WITCH, the analysis of coalitions’ profitability and stability is performed under alternative assumptions concerning the pure rate of time preference, the social welfare aggregator and the extent of climate damages. We focus on the profitability, stability, and “potential stability” of a number of coalitions which are “potentially effective” in reducing emissions. We find that only the grand coalition under a specific sets of assumptions finds it optimal to stabilize GHG concentration below 550 ppm CO2-eq. However, the grand coalition is found not to be stable, not even “potentially stable” even through an adequate set of transfers. However, there exist potentially stable coalitions, but of smaller size, which are also potentially environmentally effective. Depending on the assumptions made, they could achieve up to 600 ppm CO2-eq. More ambitious targets lead to the collapse of the coalition.

Keywords: Climate Policy, Climate Coalition, Game Theory, Free Riding

JEL Classification: C68, C72, D58, Q54

Suggested Citation

Bosetti, Valentina and Carraro, Carlo and De Cian, Enrica and Massetti, Emanuele and Tavoni, Massimo, Incentives and Stability of International Climate Coalitions: An Integrated Assessment (January 25, 2012). FEEM Working Paper No. 97.2011 ; CMCC Research Paper No. 124. Available at SSRN: https://ssrn.com/abstract=1991775 or http://dx.doi.org/10.2139/ssrn.1991775

Valentina Bosetti

Bocconi University

Via Gobbi 5
Milan, 20136
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CMCC - Euro Mediterranean Centre for Climate Change

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Carlo Carraro

Fondazione Eni Enrico Mattei (FEEM) ( email )

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Green Growth Knowledge Platform ( email )

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International Center for Climate Governance ( email )

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Enrica De Cian (Contact Author)

Fondazione Eni Enrico Mattei (FEEM) ( email )

Campo S. M. Formosa, Castello 5252
Venice, 30122
Italy

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici ( email )

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Lecce, I-73100
Italy

Emanuele Massetti

Georgia Institute of Technology ( email )

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Atlanta, GA 30332-0345
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

CMCC - Euro Mediterranean Centre for Climate Change

via Augusto Imperatore, 16
Lecce, I-73100
Italy

Massimo Tavoni

Fondazione Eni Enrico Mattei (FEEM) ( email )

Corso Magenta 63
20123 Milan
Italy

Princeton University - Princeton Environmental Institute

22 Chambers Street
Princeton, NJ 08544-0708
United States

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