International Environmental Agreements: Design of Optimal Transfers Under Heterogeneity

Calcott, Paul; Petkov, V.

doi:10.1007/s10666-011-9290-2

Cited by 4 publications

(3 citation statements)

References 22 publications

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“…29 Finally, the presence of side payments or any other form of issue linkage compounds transaction costs of reaching a global agreement. Along this line of argument Calcott and Petkov (2012) show how cross-country heterogeneity reduces the possibility of an efficient implementation of transfers. They model the case of heterogeneous countries, under full information, focusing on transfers that are time invariant, linear in emissions, and consistent with budget balance.…”

Section: Transferable Utility and Side Paymentsmentioning

confidence: 98%

Dynamic Mechanism Design for a Global Commons

Harrison

Lagunoff

2013

SSRN Journal

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This paper studies dynamic mechanisms for a global commons. A leading example is carbon consumption. We posit a model in which each country benefits both from the use and the aggregate conservation of an open access resource at each date. Conservation is beneficial because it reduces a country's environmental costs of resource use. A country's relative value of consumption-to-conservation is summarized by a privately observed parameter -its resource type -which evolves stochastically each period. An optimal quota system is an international agreement over resource consumption that maximizes world welfare subject to being implementable by Perfect Bayesian equilibria in compliance and disclosure strategies. With complete information, we show that the optimal quota is first best; it allocates more of the resource each period to countries with high value of consumption (and low value for conservation). However, under incomplete information, we show that the optimal quota is fully compressed -it is invariant to the country's resource type at every point in time. In the case of CO 2 , this means that all ex ante identical countries receive the same emissions restrictions despite having differently evolved environmental costs and resource needs. We show that full compression holds under fairly general distributions on private shocks. JEL Codes: C73, D82, F53, Q54, Q58

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Section: Transferable Utility and Side Paymentsmentioning

confidence: 98%

Dynamic Mechanism Design for a Global Commons

Harrison

Lagunoff

2013

SSRN Journal

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“…Finally, the presence of side payments or any other form of issue linkage compounds transaction costs of reaching a global agreement. Along this line of argument Calcott and Petkov () show how cross‐country heterogeneity reduces the possibility of an efficient implementation of transfers. They model the case of heterogeneous countries, under full information, focusing on transfers that are time invariant, linear in emissions, and consistent with budget balance.…”

Section: The Logic Of Full Compressionmentioning

confidence: 99%

Dynamic Mechanism Design for a Global Commons

Harrison

Lagunoff

2017

Int Economic Review

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We model dynamic mechanisms for a global commons. Countries value both consumption and conservation of an open access resource. A country's relative value of consumption to conservation is privately observed and evolves stochastically. An optimal quota maximizes world welfare subject to being implementable by Perfect Bayesian equilibria. With complete information, the optimal quota is first best; it allocates more of the resource each period to countries with high consumption value. Under incomplete information, the optimal quota is fully compressed: Identical countries receive the same quota even as environmental costs and resource needs differ. This is true even when private information is negligible.

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“…The first paper which applied bargaining solutions in fisheries was Munro (1979). There is a stream of relevant literature which emphasises the use of side-payments to support cooperation, for example Munro (2009) and Calcott and Petkov (2012). However, given that such an issue is still controversial (see Finus, 2001;and Harstad, 2008) and not directly related to the objective of this paper, we opt to ignore side payments.…”

Section: Step One: a Cooperative Solution For Establishing Mediterranmentioning

confidence: 99%

On the Allocation of Possible EU Total Allowable Catches (TAC) for the Mediterranean Swordfish: An Envy‐Free Criterion and Equitable Procedure

Kampas¹

2014

J Agricultural Economics

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This paper examines the allocation of entitlement rights for the management of common property resources. In particular, the case of allocating a Total Allowable Catch quota for the Mediterranean swordfish is examined as a case study. The proposed approach comprises three steps. First, there is a bargaining procedure between the European Union (EU) and the rest of the International Commission for the Conservation of Atlantic Tunas (ICCAT) countries. As soon as an initial agreement is possible, the EU considers various equitable rationing methods to allocate its share to the European Member States. These rationing methods draw upon two different streams of the literature, bankruptcy and ‘burden sharing’. Finally, the European Member States reach a fair agreement through minimising an envy‐free index. The allocation rule which is defined as the weighted average of equal proportion and equal share rationales represents the best compromise solution.

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International Environmental Agreements: Design of Optimal Transfers Under Heterogeneity

Cited by 4 publications

References 22 publications

Dynamic Mechanism Design for a Global Commons

Dynamic Mechanism Design for a Global Commons

Dynamic Mechanism Design for a Global Commons

On the Allocation of Possible EU Total Allowable Catches (TAC) for the Mediterranean Swordfish: An Envy‐Free Criterion and Equitable Procedure

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