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Self-enforcing environmental agreements and trade in fossil energy deposits

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  • Eichner, Thomas
  • Pethig, Rüdiger

Abstract

The literature on self-enforcing environmental agreements (SIEAs) focuses on de- mand-side emission-reduction policies. To our knowledge, Harstad (2012) is the only study on SIEAs, in which countries purchase fossil-energy deposits to prevent their exploitation. He finds that for any coalition size there exists a (small) subset of parameters, different for each size, such that the coalition of that size is stable. However, the comparison of Harstad's results with the prevailing demand-side SIEA analyses is hampered by major differences in the structure of the respective game models. This paper develops a game model with a deposit market and deposit purchases for preservation that is in line with some demand-side SIEA literature. It turns out that either no coalition is stable or the grand coalition is the only stable coalition. We compare the outcome of our model not only with Harstad's model but also with Eichner and Pethig's (2015) model of the formation of SIEAs in which climate policy takes the form of (demand-side) emissions taxes.

Suggested Citation

  • Eichner, Thomas & Pethig, Rüdiger, 2017. "Self-enforcing environmental agreements and trade in fossil energy deposits," Journal of Environmental Economics and Management, Elsevier, vol. 85(C), pages 1-20.
    • Handle: RePEc:eee:jeeman:v:85:y:2017:i:c:p:1-20
    DOI: 10.1016/j.jeem.2017.04.004
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    References listed on IDEAS

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    1. Eichner, Thomas & Pethig, Rüdiger, 2013. "Self-enforcing environmental agreements and international trade," Journal of Public Economics, Elsevier, vol. 102(C), pages 37-50.
    2. Effrosyni Diamantoudi & Eftichios S. Sartzetakis, 2006. "Stable International Environmental Agreements: An Analytical Approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(2), pages 247-263, May.
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    4. Finus, Michael & Pintassilgo, Pedro, 2013. "The role of uncertainty and learning for the success of international climate agreements," Journal of Public Economics, Elsevier, vol. 103(C), pages 29-43.
    5. Bård Harstad, 2010. "Buy Coal! Deposit Markets Prevent Carbon Leakage," CESifo Working Paper Series 2992, CESifo.
    6. Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
    7. By Thomas Eichner & Rüdiger Pethig, 2015. "Self-enforcing international environmental agreements and trade: taxes versus caps," Oxford Economic Papers, Oxford University Press, vol. 67(4), pages 897-917.
    8. Michael Hoel & Kerstin Schneider, 1997. "Incentives to participate in an international environmental agreement," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 9(2), pages 153-170, March.
    9. Carraro, Carlo & Siniscalco, Domenico, 1993. "Strategies for the international protection of the environment," Journal of Public Economics, Elsevier, vol. 52(3), pages 309-328, October.
    10. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-894, Supplemen.
    11. Bård Harstad, 2012. "Buy Coal! A Case for Supply-Side Environmental Policy," Journal of Political Economy, University of Chicago Press, vol. 120(1), pages 77-115.
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    Citations

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    Cited by:

    1. Michael Lazarus & Harro van Asselt, 2018. "Fossil fuel supply and climate policy: exploring the road less taken," Climatic Change, Springer, vol. 150(1), pages 1-13, September.
    2. Al Khourdajie, Alaa & Finus, Michael, 2020. "Measures to enhance the effectiveness of international climate agreements: The case of border carbon adjustments," European Economic Review, Elsevier, vol. 124(C).
    3. Dulong, Angelika von & Hagen, Achim & Mendelevitch, Roman & Eisenack, Klaus, 2023. "Buy coal and gas? Interfuel carbon leakage on deposit markets with market power," Energy Economics, Elsevier, vol. 117(C).
    4. Finus, Michael & Furini, Francesco & Rohrer, Anna Viktoria, 2021. "The efficacy of international environmental agreements when adaptation matters: Nash-Cournot vs Stackelberg leadership," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    5. Strand,Jon, 2021. "Incentivizing Carbon Taxation in Low-Income Countries : Tax Rebating versus Carbon Crediting," Policy Research Working Paper Series 9698, The World Bank.
    6. Peszko,Grzegorz & Van Der Mensbrugghe,Dominique & Golub,Alexander Alexandrovich, 2020. "Diversification and Cooperation Strategies in a Decarbonizing World," Policy Research Working Paper Series 9315, The World Bank.

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    More about this item

    Keywords

    Climate coalition; Fossil fuel deposits; Nash equilibrium; Self-enforcing international environmental agreements;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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