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Sustainable development and international distribution: Theory and application to rainforests as carbon sinks

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  • Mohr, Ernst

Abstract

A situation is analysed in which two countries negotiate the financing of the incremental costs which accrue if one of them switches from a non-sustainable onto a sustainable development path. The other country's incentive to pay arises as it benefits from the developing country's environmental resources, but at an ever declining rate as long as development remains non-sustainable. The paper shows that such negotiations induce a redistribution of income in favour of the developing country which in general will exceed incremental costs. The paper also derives conditions under which the developing country has an incentive to get on a less sustainable path in the pre-agreement phase. In an application to the protection of tropical rainforests as carbon sinks it is shown that North to South redistribution of welfare would indeed be substantial. However, despite these transfer payments in excess of incremental costs the North would still gain enormously in efficiency terms from the use of the carbon sink option.

Suggested Citation

  • Mohr, Ernst, 1993. "Sustainable development and international distribution: Theory and application to rainforests as carbon sinks," Kiel Working Papers 602, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:602
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    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Mohr, Ernst, 1990. "Burn the forest!: A bargaining theoretic analysis of a seemingly perverse proposal to protect the rainforest," Kiel Working Papers 447, Kiel Institute for the World Economy (IfW Kiel).
    3. William R. Cline, 1992. "Economics of Global Warming, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 39, January.
    4. Ausubel, Lawrence M & Deneckere, Raymond J, 1992. "Bargaining and the Right to Remain Silent," Econometrica, Econometric Society, vol. 60(3), pages 597-625, May.
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    Cited by:

    1. Frank Stähler, 1996. "On International compensations for environmental stocks," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 8(1), pages 1-13, July.

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    More about this item

    Keywords

    Non-cooperative bargaining; environment; North-South cooperation; climate policy;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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