Strategic Behavior and the Environment > Vol 7 > Issue 3–4

Global Environmental Agreements and International Trade: Asymmetry of Countries Matters

Thomas Eichner, Department of Economics, University of Hagen, Germany, , Rüdiger Pethig, Department of Economics, University of Siegen, Germany,
Suggested Citation
Thomas Eichner and Rüdiger Pethig (2018), "Global Environmental Agreements and International Trade: Asymmetry of Countries Matters", Strategic Behavior and the Environment: Vol. 7: No. 3–4, pp 281-316.

Publication Date: 12 Feb 2018
© 2018 T. Eichner & R. Pethig
Environmental Economics: Climate Change,  Public Economics: Environmental Taxation
JEL Codes: C72F18Q50Q58
Fuel demandClimate damageInternational tradeAsymmetryStabilityGrand coalition


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In this article:
The Problem 
Analytical Framework 
Welfare Functions 
Stability of the Grand Coalition 
Summary and Concluding Remarks 


We investigate the formation of global climate agreements (stable grand climate coalitions) in a model, in which climate policy takes the form of carbon emission taxation and fossil fuel and consumption goods are traded on world markets. We expand the model of Eichner and Pethig (2015a) by considering countries that are identical within each of two groups but differ across groups with respect to climate damage or fossil fuel demand. Our numerical analysis suggests that climate damage asymmetry tends to discourage cooperation in the grand coalition. The effects of fuel-demand asymmetry depend on fossil fuel abundance. If fuel is very abundant, the grand coalition fails to be stable independent of the degree of fuel-demand asymmetry. If fuel is sufficiently scarce, low degrees of fuel-demand asymmetry discourage cooperation whereas higher degrees of asymmetry stabilize the grand coalition.



Strategic Behavior and the Environment, Volume 7, Issue 3-4 International Environmental Agreements: Articles Overiew
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