Self-enforcing agreements under unequal nationally determined contributions

Emilson Silva

International Tax and Public Finance, 2017, vol. 24, issue 4, No 7, 705-729

Abstract: Abstract The Paris Agreement builds on intended nationally determined contributions (INDCs) submitted by most participating nations. The INDCs vary across nations, since national circumstances differ, including national incomes and damages. The INDCs follow a bottom-up approach, whereby nations submit their plans of actions in a Nash-like form (i.e., taking the other nations’ plans as given). We build a model with normal goods and an unequal world income distribution to consider the endogenous formation and stability of an international environmental agreement (IEA) under the bottom-up approach. Nations provide carbon abatement and produce R&D efforts that promote improvements in environmental efficiency of their outputs. Nations share R&D efforts and enjoy R&D spillovers if they join an IEA. Non-members do not enjoy R&D spillovers. Global carbon abatement rises as the IEA expands in size due to the R&D spillovers. We show that the Grand Coalition is stable under a nearly perfectly equitable income distribution, where all nations make positive carbon abatement and R&D contributions. We also consider a more realistic world income distribution, in which some nations lack sufficient income to provide carbon abatement and R&D. In this case, the stable coalition contains all (wealthier) nations that make positive abatement and R&D contributions. For a very unequal world income distribution, not even a bilateral IEA, with the two richest nations in the world, is stable. The stable IEAs provide too little carbon abatement relative to the first best.

Keywords: International environmental agreements; Self-enforcing; Nationally determined contributions; R&D sharing (search for similar items in EconPapers)
JEL-codes: D74 H41 Q54 Q55 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://link.springer.com/10.1007/s10797-017-9463-2 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Self-Enforcing Agreements under Unequal Nationally Determined Contributions (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:24:y:2017:i:4:d:10.1007_s10797-017-9463-2

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2

DOI: 10.1007/s10797-017-9463-2

Access Statistics for this article

International Tax and Public Finance is currently edited by Ronald B. Davies and Kimberly Scharf

More articles in International Tax and Public Finance from Springer, International Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().