Forging a global environmental agreement through trade sanctions on free riders?

Thomas Eichner and Rüdiger Pethig

Volkswirtschaftliche Diskussionsbeiträge from Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht

Abstract: This paper studies the formation of self-enforcing global environmental agreements in a world economy with international trade and two groups of countries that differ with respect to fuel demand and environmental damage. It investigates whether the signatories’ threat to embargo (potential) free riders secures all countries’ participation in the agreement. Resorting to numerical analysis, we find that an embargo may be unnecessary, ineffective or even counterproductive - depending on the degree of asymmetry and other parameters. On some subset of parameters, the embargo stabilizes the otherwise unstable global agreement, but the threat of embargo is not credible. However, in some of these cases credibility can be restored by suitable intra-coalition transfers.

Keywords: embargo; trade; asymmetry; free rider; fuel demand; climate damage (search for similar items in EconPapers)
JEL-codes: F02 Q50 Q58 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014
New Economics Papers: this item is included in nep-ene, nep-env, nep-int and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.wiwi.uni-siegen.de/vwl/repec/sie/papers/171-14.pdf (application/pdf)

Related works:
Working Paper: Forging a Global Environmental Agreement through Trade Sanctions on Free Riders? (2015)
Working Paper: Forging a global environmental agreement through trade sanctions on free riders? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:sie:siegen:171-14

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