Toward Farsightedly Stable International Environmental Agreements

Abstract

The stability of International Environmental Agreements (IEA) is analyzed by using game theory. The integrated assessment model FUND provides the cost-benefit payoff functions of pollution abatement for sixteen different world regions. The farsighted stability concept of Chwe (1994) is used and solved by combinatorial algorithms. Farsighted stability assumes perfect foresight of the players and predicts which coalitions can be formed when players are farsighted. All farsightedly stable coalitions are found, and their improvement to environment and welfare is considerable. The farsightedly stable coalitions are refined further to preferred farsightedly stable coalitions, which are coalitions where the majority of coalition members reach higher profits in comparison with any other farsightedly stable coalitions. Farsightedly stable coalitions contribute more to the improvement of environment and welfare in comparison to D'Aspremont et al.'s (1983) stable ones. Considering multiple farsighted stable coalitions, participation in coalitions for environmental protection is significantly increased, which is an optimistic result of our game theoretical model. Copyright � 2009 Wiley Periodicals, Inc..

Climate policy targets in emerging and industrialized economies: the influence of technological differences, environmental preferences and propensity to save

“…As in Carbone et al (2009), marginal utility of reductions in global emissions are constant over time but different across countries. n * \ n would correspond to common parameterizations in the game-theoretic literature (Tol 2001;Pearce 2003;Buchner and Carraro 2004;Eyckmans and Finus 2007;Osmani and Tol 2009), reflecting that perceived benefits of mitigating climate change are higher in industrialized countries than in emerging economies. On the other hand, more severe impacts of climate change are expected for less developed countries, especially when located at lower latitudes due to sea-level rise and climate related natura disasters (Stern 2006).…”

“…Tol 2001;Pearce 2003;Buchner and Carraro 2004;Eyckmans and Finus 2007;Osmani and Tol 2009;Weikard et al 2010). In the present paper, emission reduction benefits and costs are based on economic fundamentals: technological differences in aggregate production functions (emission intensity, production elasticity of capital and labor), dissimilar saving rates, and differences in household preferences with respect to global warming.…”

Towards a Better Understanding of Climate Change Negotiations

“…The contributions in the field of economic game theory can be broadly divided into three categories: the 'traditional' economic approach, the 'modified' economic approach, and the mixed-method approach. The 'traditional' approach is characterized by the use of Integrated Assessment Models and a narrow focus on solving mathematical problems (For example, Carraro, Eyckmans and Finus, 2005;Osmani, 2011). The 'modified' approach is characterized by attempts to update game theoretic models in order to better account for important 'realities', for example by relaxing economic assumptions or adding moral assumptions into economic models (For example, Eyckmans and Finus, 2003;Eyckmans and Kverndokk, 2009;Chou and Sylla, 2008).…”

Cleaner Technologies and the Stability of International Environmental Agreements

“…Therefore, we use an alternative set of stability criteria referred to in the literature as "farsightedness" under which when a country considers leaving an IEA, it takes into account the implications on other countries' adhesion to the IEA. We analyze the stability of coalitions using the farsighted stability concept as used by Eyckmans (2003), Diamantoudi and Sartzetakis (2006), Osmani andTol (2009) andde Zeeuw (2008) in the context of environmental agreements. In this paper, we shall focus on the case of a small number of players because we believe that it is in those situations where the assumption of farsightedness seems most realistic.…”