Self-Enforcing Agreements Under Unequal Nationally Determined Contributions
28 Pages Posted: 6 Jan 2016
Date Written: January 4, 2016
For a large global economy, containing at least 195 nations, with normal goods, and an unequal world income distribution, we consider the endogenous formation and stability of an international environmental agreement (IEA) under nationally determined contributions (NDCs). Nations share green R&D efforts and enjoy R&D spillovers if they join an IEA. Nonmembers do not enjoy R&D spillovers. We show that the Grand Coalition is stable under NDCs if all nations are active carbon abatement and R&D contributors. If some nations are inactive, because they lack sufficient income to provide carbon abatement and R&D, the stable coalition under NDCs is the coalition of all active (wealthier) nations. For comparison purposes, we also show that if IEAs are subject to collectively determined contributions, the stable coalition structure is the stand-alone one.
Keywords: International environmental agreements, self-enforcing, nationally determined contributions, R&D sharing
JEL Classification: D74, F53, H41, Q54, Q55
Suggested Citation: Suggested Citation