Largest Consistent Set in International Environmental Agreements

“…The literature focusing on the stability of linked markets is of special interest to us. The first paper in this area is Biancardi and Villani [14], which used a two-stage, noncooperative game theoretic model to study international environmental agreements in a pollution abatement model with a quadratic cost function and symmetric jurisdictions. Each jurisdiction first decides whether to join the coalition and then chooses its quantity of pollution abatements.…”

Section: Literature Reviewmentioning

confidence: 99%

Stable Linking of the Emission Permit Markets

Sošić

2023

Sustainability

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The linking of emission permit markets allows participants in different systems to purchase allowances from each other for the purpose of domestic compliance. A recent paper studied the efficiency gains generated in multilateral linkings between permit markets, and concluded that, despite the linking of all jurisdictions maximizing gains, it is not likely to emerge as it is not the most preferred option by all participants. We formulate the linking problem as a cooperative game and show that the linking of all jurisdictions satisfies core stability criteria. Thus, no subset of jurisdictions would benefit from creating their separate market, and the gains will be maximized. We then extend our analysis to arbitrary partitions and farsightedness level and analyze the stable linking of markets between Australia, Canada, the EU, South Korea, and the U.S. Our results indicate that the most likely stable configuration includes a market that links Australia, the EU, and the U.S., and another in which Canada is linked with South Korea. This scenario leaves about 15% of the potential gains unrealized. To mitigate this issue, we suggest that efficiency gains from market linkage be allocated according to the Shapley value, in which case our results suggest that we would see stable linking of all five jurisdictions and thus increase the efficiency.

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“…Biancardi (2010), using a dynamic model with a stock pollutant where countries play a differential game in the second stage, also confirms the results of Sartzetakis (2002, 2006) on the different implications of myopic and farsighted stability. Both Biancardi (2010) and Biancardi and Villani (2011) show that the higher the environmental awareness of countries the more likely the large coalitions are formed under farsighted stability.…”

Section: Farsighted Gamesmentioning

confidence: 99%

International Environmental Agreements: Doomed to Fail or Destined to Succeed? A Review of the Literature

Marrouch

Chaudhuri

2016

IRERE

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We survey the economics literature on International Environmental Agreements (IEAs). We classify the extant literature into the following categories: pure IEA games without linkages, which focus on a single externality stemming from global pollution; IEA games with side payments and issue linkages, which consider carrot or stick mechanisms to lure cooperators or punish defectors; political economy models, which examine intra-and intergovernmental issues that affect international negotiations; design issues of IEAs; behavioral factors, which affect the willingness of countries to cooperate; and additional externalities resulting from open economy issues and adaptation, which interact with the global pollution externality and affect the free-riding incentives of countries. Based on this classification of the literature, we attempt to identify conditions under which an * We would like to thank Rita Antar for her excellent research assistance. We appreciate insightful comments by two anonymous reviewers and the editors.

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Largest Consistent Set in International Environmental Agreements

Abstract: IEA, Farsightedness, Implementation, F50, C60,

Cited by 3 publications

References 23 publications

Bottom-up linking of carbon markets under far-sighted cap coordination and reversibility

Bottom-up linking of carbon markets under far-sighted cap coordination and reversibility

Stable Linking of the Emission Permit Markets

International Environmental Agreements: Doomed to Fail or Destined to Succeed? A Review of the Literature

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