Boon or Bane? Trade Sanctions and the Stability of International Environmental Agreements

36 Pages Posted: 19 Oct 2017 Last revised: 7 Nov 2017

See all articles by Achim Hagen

Achim Hagen

Humboldt University of Berlin

Jan Schneider

University of Oldenburg; ZenTra - Center for Transnational Studies

Date Written: October 19, 2017

Abstract

In spite of scientific agreement on the negative effects of anthropogenic climate change, efforts to find cooperative solutions on the international level have been unsatisfactory so far. Trade sanctions in the form of import tariffs are one principal measure discussed as a means to foster cooperation. Former studies have concluded that import tariffs are an effective mechanism to establish international cooperation. However, most of these studies rely on the assumption that outsiders are not able to retaliate, i.e. to implement import tariffs themselves. In this paper we use combined analytical and numerical analysis to investigate implications of retaliation. We find a threshold effect: below a certain coalition size the effect of retaliation predominates and decreases incentives to be a coalition member. In coalitions above the threshold size the effect of trade sanctions that stabilizes coalitions dominates and enables the formation of larger stable coalitions. Our analysis suggests that only after a sufficiently large climate coalition has already been formed, the threat of trade sanctions might be an effective stick to establish the grand coalition.

Keywords: international environmental agreements; computable general equilibrium

JEL Classification: D58, Q54, Q58

Suggested Citation

Hagen, Achim and Schneider, Jan, Boon or Bane? Trade Sanctions and the Stability of International Environmental Agreements (October 19, 2017). ZenTra Working Paper in Transnational Studies No. 75/2017, Available at SSRN: https://ssrn.com/abstract=3055629

Achim Hagen (Contact Author)

Humboldt University of Berlin ( email )

Unter den Linden 6
Berlin, Berlin 10999
Germany

Jan Schneider

University of Oldenburg ( email )

Ammerländer Heerstraße 114-118
Oldenburg, D-26111
Germany

ZenTra - Center for Transnational Studies ( email )

Ammerländer Heerstraße 138
Oldenburg, 26131
Germany

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