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Endogenous Climate Coalitions and Free Trade - Building the Missing Link

Author

Listed:
  • Thomas Kuhn

    (Chemnitz University of Technology, Department of Economics, Professur VWL IV Finanzwissenschaft)

  • Radomir Pestow

    (Chemnitz University of Technology, Department of Economics, Professur VWL IV Finanzwissenschaft)

  • Anja Zenker

    (Chemnitz University of Technology, Department of Economics, Professur VWL IV Finanzwissenschaft)

Abstract

In this paper, we discuss the endogenous formation of climate coalitions in an issue-linkage regime. In particular, we propose to build a link to the issue of preferential free trade. Trade privileges exclusively granted to members of the climate coalition work as an incentive mechanism for countries to join in. A multi-stage strategic trade framework is used in which coalition (fringe) countries can dispose of a policy set comprising a discriminatory import-tariff on dirty goods as well as producer emission permits traded on a common (local) permits market. A fairly novel modelling of the preferential free trade area is incorporated which is at the core of our approach. We find strong support for the claim that trade liberalization can promote relatively large and effective climate coalitions compared to the single issue regime. As a policy implication, negotiations on international climate treaties and free trade arrangements should be interlinked.

Suggested Citation

  • Thomas Kuhn & Radomir Pestow & Anja Zenker, 2018. "Endogenous Climate Coalitions and Free Trade - Building the Missing Link," Chemnitz Economic Papers 018, Department of Economics, Chemnitz University of Technology.
    • Handle: RePEc:tch:wpaper:cep018
    as

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    File URL: https://www.tu-chemnitz.de/wirtschaft/vwl1/RePEc/download/tch/wpaper/CEP018_19_02_2018_Endogenous_Climate_Coalitions.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Climate Change; International Environmental Agreements; Free Trade; Issue Linkage; Emission Permits;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F15 - International Economics - - Trade - - - Economic Integration
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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