Transfers in international environmental agreements under heterogeneity

ABSTRACT

This paper analytically compares the effectiveness of internal and external transfers in encouraging participants in international environmental agreements (IEAs). We divide countries into two homogeneous groups: developed and developing countries. Further, we assume that strong asymmetries exist in their abatement benefits and costs. Using the non-cooperative game model of coalition formation, our result shows that both types of transfers can enlarge the size of self-enforcing coalitions, and the external transfers are always preferred.

KEYWORDS:

• International environmental agreements
• coalition formation
• transfers
• heterogeneous countries

Acknowledgment

The authors thank the anonymous reviewers and the editor for their helpful comments.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ For our purpose, we use self-enforcing and stable interchangeably.

² Binary choice means that each country faces two choices: abate, which leads the emission level to 0; pollute, which leads that to 1.

³ The proof is available upon request.

Additional information

Funding

This work was supported by the Japan Society for the Promotion of Science [JP17H01939,JP18K01573].