Hostname: page-component-586b7cd67f-2plfb Total loading time: 0 Render date: 2024-11-20T09:39:00.887Z Has data issue: false hasContentIssue false
  • English
  • Français

The role of fixed cost in international environmental negotiations

Published online by Cambridge University Press:  03 February 2011

BASAK BAYRAMOGLU  and
JEAN-FRANÇOIS JACQUES
BASAK BAYRAMOGLU
Affiliation:
INRA, UMR Economie Publique; AgroParisTech, Avenue Lucien Brétignières, 78850 Thiverval Grignon, France. Tel: (0)1 30 81 45 35. Email: [email protected]
JEAN-FRANÇOIS JACQUES
Affiliation:
LEDa, Université Paris-Dauphine, Place du Maréchal de Lattre de Tassigny, 75016 Paris, France. Tel: (0)1 44 05 44 60. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

We investigate the relative efficiency of an agreement based on a uniform standard without transfers and one based on differentiated standards with transfers when strictly identical countries deal with transboundary pollution. We especially ask what role fixed cost plays. Two approaches are examined: the Nash bargaining solution, involving two countries, and the coalition formation framework, involving numerous countries and emphasizing self-enforcing agreements. In the former, in terms of welfare, strictly identical countries may wish to reduce their emissions in a non-uniform way under the differentiated agreement. For this result to hold, the fixed cost of investment in abatement technology must be sufficiently high. The nature of the threat point of negotiations, however, also plays a crucial role. As concerns global abatement, the two countries abate more under the uniform agreement than under the differentiated one. In terms of coalition formation when numerous countries are involved, a grand coalition could emerge under a differentiated agreement.

Type
Research Article
Information
Environment and Development Economics , Volume 16 , Issue 2 , April 2011 , pp. 221 - 238
Copyright
Copyright © Cambridge University Press 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

d'Aspremont, C., Jacquemin, A., Gabszewicz, J.J., and Weymark, J. (1983), ‘On the stability of collusive price leadership’, Canadian Journal of Economics 16: 17–25.CrossRefGoogle Scholar
Barrett, S. (1994), ‘Self-enforcing international environmental agreements’, Oxford Economic Papers 46: 878–894.Google Scholar
Barrett, S. (2003), Environment & Statecraft, The Strategy of Environmental Treaty-Making, New York: Oxford University Press, Inc.Google Scholar
Bayramoglu, B. and Jacques, J.-F. (2005), ‘Comparison of negotiated uniform vs. differentiated abatement standards for a transboundary pollution problem’, Cahiers de recherche EURIsCO No. 15, Université Paris-Dauphine, Paris.Google Scholar
Boyer, M. and Laffont, J.-J. (1999), ‘Toward a political theory of the emergence of environmental incentive regulation’, Rand Journal of Economics 30: 137–157.CrossRefGoogle Scholar
Carraro, C. and Siniscalco, D. (1993), ‘Strategies for international protection of the environment’, Journal of Public Economics 52: 309–328.CrossRefGoogle Scholar
Chander, P. and Tulkens, H. (1995), ‘A core-theoretic solution for the design of cooperative agreements on transfrontier pollution’, International Tax and Public Finance 2: 279–294.CrossRefGoogle Scholar
Copeland, B. and Taylor, S. (2005), ‘Free trade and global warming: a trade theory view of the Kyoto protocol’, Journal of Environmental Economics and Management 49: 205–234.CrossRefGoogle Scholar
de Zeeuw, A. (2008), ‘Dynamic effects on the stability of international environmental agreements’, Journal of Environmental Economics and Management 55: 163–174.Google Scholar
Finus, M. (2001), Game Theory and International Environmental Cooperation, Cheltenham: Edwar Elgar, Inc.CrossRefGoogle Scholar
Finus, M. and Rundshagen, B. (1998), ‘Toward a positive theory of coalition formation and endogenous instrumental choice in global pollution control’, Public Choice 96: 145–186.CrossRefGoogle Scholar
Finus, M. and Rundshagen, B. (2003), ‘Endogenous coalition formation in global pollution control: a partition function approach’, in Carraro, C. (ed.), The Endogenous Formation of Economic Coalitions, Cheltenham: Edward Elgar, pp. 199–243.Google Scholar
Harstad, B. (2007), ‘Harmonization and side payments in political cooperation’, American Economic Review 97: 871–889.CrossRefGoogle Scholar
Hoel, M. (1991), ‘Global environmental problems: the effects of unilateral actions taken by one country’, Journal of Environmental Economics and Management 20: 55–70.Google Scholar
Hoel, M. (1992), ‘International environment conventions: the case of uniform reductions of emissions’, Environmental and Resource Economics 2: 141–159.CrossRefGoogle Scholar
Kolstad, C.D. (1987), ‘Uniformity versus differentiation in regulating externalities’, Journal of Environmental Economics and Management 14: 386–399.Google Scholar
Kolstad, C.D. (2000), Environmental Economics, New York: Oxford University Press.Google Scholar
Larson, B.A. and Tobey, J.A. (1994), ‘Uncertain climate change and the international policy response’, Ecological Economics 11: 77–84.Google Scholar
McAusland, C. (2005), ‘Harmonizing tailpipe policy in symmetric countries: improve the environment, improve welfare?’, Journal of Environmental Economics and Management 50: 229–251.Google Scholar
Nash, J.F. (1950), ‘The bargaining problem’, Econometrica 18: 155–162.Google Scholar
Rubio, S.J. and Casino, B. (2005), ‘Self-enforcing international environmental agreements with a stock pollutant’, Spanish Economic Review 7: 89–109.CrossRefGoogle Scholar
Schelling, T.C. (1960), The Strategy of Conflict, Cambridge: Harvard University Press.Google Scholar
Welsch, H. (1992), ‘Equity and efficiency in international CO2 agreements’, in Hope, E. and Strom, S. (eds), Energy Markets and Environmental Issues: A European Perspective, Oslo: Scandinavian University Press, pp. 211–225.Google Scholar
Supplementary material: PDF

Bayramoglu Supplementary Material

Bayramoglu Supplementary Appendix

Download Bayramoglu Supplementary Material(PDF)
PDF 110.5 KB