Parallel Climate Blocs: Incentives to Cooperation in International Climate Negotiations

28 Pages Posted: 30 Nov 2006

See all articles by Carlo Carraro

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

Barbara K. Buchner

International Energy Agency; Fondazione Eni Enrico Mattei (FEEM)

Date Written: July 2006

Abstract

There are increasing signals that countries that negotiate on GHG emission control are unlikely to sign and ratify a single climate protocol, even though almost all countries have subscribed the UNFCCC convention that sets the framework of international climate cooperation. In addition to the US decision not to ratify the Kyoto Protocol, New Zealand and Australia recently led to the formation of a new alliance in which technological cooperation is the main tool to achieve GHG emission control. In the U.S., some States on the Eastern coast are negotiating to adopt emission reduction targets and to establish a permit market despite the opposition of the federal government. Cooperation on climate policy is also the objective of recent negotiations between ASEAN countries. Given this background, this paper aims at examining whether the aforementioned events are simply the noise of a political process leading to a global agreement on climate change control or are instead consistent with some basic economic incentives that are pushing countries towards the formation of two (or more) parallel climate blocs. To this aim, this paper uses a well known integrated assessment climate-economy model to evaluate the incentives to cooperation in climate negotiations for the main world countries. A game-theoretic framework is adopted to analyse a country's incentive to belong to a climate coalition. In our setting, a given country can either join one of the existing climate coalitions or can propose a new one or can decide to free-ride on the other countries' cooperative abatement effort. We then analyse the haracteristics of the main possible outcomes and assess which outcomes are most likely to prevail in future negotiations, at least as far as economic incentives are concerned.

Keywords: Agreements, Climate, Incentives, Negotiations, Policy

JEL Classification: C72, H23, Q25, Q28

Suggested Citation

Carraro, Carlo and Buchner, Barbara K., Parallel Climate Blocs: Incentives to Cooperation in International Climate Negotiations (July 2006). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 45/06, Available at SSRN: https://ssrn.com/abstract=948381 or http://dx.doi.org/10.2139/ssrn.948381

Carlo Carraro (Contact Author)

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