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Sticks and Carrots for the Design of International Climate Agreements with Renegotiations

Author

Listed:
  • Hans-Peter Weikard

    (Wageningen University)

  • Rob Dellink

    (VU University Amsterdam)

Abstract

This paper examines stability of international climate agreements for carbon abatement under an optimal transfer rule and renegotiations. The optimal transfer rule suggested to stabilise international environmental agreements (Weikard 2005, Carraro, Eyckmans and Finus 2006) is no longer optimal when agreements are renegotiated. We determine the conditions for optimal self-enforcing sequences of agreements. If these conditions are met, then transfer payments can be arranged such that no country wants to change its membership status at any stage. In order to demonstrate the applicability of our condition we use the STACO model, a 12-regions global model, to assess the impact of welldesigned transfer rules on the stability of an international climate agreement. Although there are strong free-rider incentives, we find a stable grand coalition in the first commitment period in a game with one round of renegotiations.

Suggested Citation

  • Hans-Peter Weikard & Rob Dellink, 2008. "Sticks and Carrots for the Design of International Climate Agreements with Renegotiations," Working Papers 2008.26, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2008.26
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    Cited by:

    1. Hans-Peter Weikard & Leo Wangler & Andreas Freytag, 2015. "Minimum Participation Rules with Heterogeneous Countries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 711-727, December.
    2. Achim Hagen & Juan-Carlos Altamirano-Cabrera & Hans-Peter Weikard, 2021. "National political pressure groups and the stability of international environmental agreements," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 21(3), pages 405-425, September.
    3. Costantini, Valeria & Sforna, Giorgia & Zoli, Mariangela, 2016. "Interpreting bargaining strategies of developing countries in climate negotiations. A quantitative approach," Ecological Economics, Elsevier, vol. 121(C), pages 128-139.
    4. S. Yu & E. C. Ierland & H.-P. Weikard & X. Zhu, 2017. "Nash bargaining solutions for international climate agreements under different sets of bargaining weights," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 17(5), pages 709-729, October.
    5. Antimiani, Alessandro & Costantini, Valeria & Markandya, Anil & Paglialunga, Elena & Sforna, Giorgia, 2016. "Assessing costs and benefits of current climate negotiations," Conference papers 332752, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Hans-Peter Weikard & Rob Dellink & Ekko Ierland, 2010. "Renegotiations in the Greenhouse," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(4), pages 573-596, April.
    7. Eichner, Thomas & Kollenbach, Gilbert, 2022. "Environmental agreements, research and technological spillovers," European Journal of Operational Research, Elsevier, vol. 300(1), pages 366-377.

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    More about this item

    Keywords

    Stability of Coalitions; International Environmental Agreements; Partition Function Approach; Sharing Rules; Optimal Transfers; Renegotiations;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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