In this paper, we discuss the endogenous formation of climate coalitions in the tradition of the issue-linkage literature. In particular, we propose a preferential free trade agreement on which a climate coalition should be built. The basic idea is that the benefits of free trade provide strong incentives for free riders to join the coalition. As a framework, a multi-stage strategic trade model is used in which a country may discourage greenhouse gas emissions by setting an emissions cap effective on a permit market. In addition, a discriminatory import tariff is imposed on dirty goods. However, at the heart of our approach are the trade privileges granted to coalition members shifting the terms of trade favourably without prodiving incentives towards eco-dumping. As a main result, we find that trade liberalisation is much more effective in building climate coalitions than a single-issue environmental agreement. The parametrical simulation of the model in particular shows that participation in joint emission reduction is higher, consumption patterns are more environmentally friendly, and coalitional welfare is improved. As a policy implication, negotiations on climate treaties and free trade arrangements should be integrated.

Background A wide variety of footprint concepts is proposed in the scientific literature giving rise to a selection problem. Method The objective of this paper is to provide an axiomatic foundation to the concept of ecological footprint indices, in particular carbon and energy footprints. For this purpose, we define five axioms representing general properties which any ecological footprint measure should fulfill. Results It can be shown that there exists a unique index which is characterized by the given set of axioms. Its functional form is determined, and an economic interpretation is given. The most prominent empirical application is discussed. Conclusion We find that the proposed index as a generalization of more specific indices like carbon and energy footprint indices may confirm some important issues discussed in the literature. First, it incorporates a trade component indicating the ecological footprint of economic activities embodied in the trade pattern of a country or region. Moreover, the productivity of land use in production as a means to mitigate the pressure on the ecological system is reflected. But, most importantly, from a methodological point of view, there is no longer the need for designing ecological footprint indices ad hoc, in particular for the sake of empirical application.

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