Sticks and Carrots for the Design of International Climate Agreements with Renegotiations

31 Pages Posted: 23 Apr 2008

See all articles by Hans-Peter Weikard

Hans-Peter Weikard

Wageningen UR - School of Social Sciences

Rob Dellink

Wageningen UR - Environmental Economics and Natural Resources Group; Organization for Economic Co-Operation and Development (OECD)

Date Written: March 1, 2008

Abstract

This paper examines stability of international climate agreements for carbon abatement under an optimal transfer rule and renegotiations. The optimal transfer rule suggested to stabilise international environmental agreements (Weikard 2005, Carraro, Eyckmans and Finus 2006) is no longer optimal when agreements are renegotiated. We determine the conditions for optimal self-enforcing sequences of agreements. If these conditions are met, then transfer payments can be arranged such that no country wants to change its membership status at any stage. In order to demonstrate the applicability of our condition we use the STACO model, a 12-regions global model, to assess the impact of welldesigned transfer rules on the stability of an international climate agreement. Although there are strong free-rider incentives, we find a stable grand coalition in the first commitment period in a game with one round of renegotiations.

Keywords: Stability of Coalitions, International Environmental Agreements, Partition Function Approach, Sharing Rules, Optimal Transfers, Renegotiations

JEL Classification: C72, D62, H41, H77

Suggested Citation

Weikard, Hans-Peter and Dellink, Rob, Sticks and Carrots for the Design of International Climate Agreements with Renegotiations (March 1, 2008). FEEM Working Paper No. 26.2008, Available at SSRN: https://ssrn.com/abstract=1115750 or http://dx.doi.org/10.2139/ssrn.1115750

Hans-Peter Weikard (Contact Author)

Wageningen UR - School of Social Sciences ( email )

De Leeuwenborch
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6706 KN Wageningen
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+31 317 48 49 33 (Fax)

Rob Dellink

Wageningen UR - Environmental Economics and Natural Resources Group ( email )

P.O. Box 8130
Wageningen, 6700 EW
Netherlands
+31 (0)317 4 82009 (Phone)
+31 (0)317 4 84933 (Fax)

HOME PAGE: http://www.sls.wau.nl/enr/staff/dellink/

Organization for Economic Co-Operation and Development (OECD) ( email )

Paris
France

HOME PAGE: http://www.oecd.org/env/cc/econ

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