International environmental agreements for local and global pollution |
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| Institution: | 1. Center for Mathematical Economics, Bielefeld University, P.O. Box 100131, 33501 Bielefeld, Germany;2. Bielefeld Graduate School of Economics and Management (BiGSEM), Bielefeld University, Germany;1. Department of Economics and Institute of Sustainability and the Environment, Western Michigan University, Kalamazoo, MI 49008-5330, United States;2. Department of Agricultural, Food, and Resource Economics, Michigan State University, East Lansing, MI 48824, United States;1. Department of Economics, University of Wisconsin-Milwaukee, PO Box 413, Milwaukee, WI 53201, United States;2. University of North Texas, United States |
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| Abstract: | Increasing concerns about climate change have given rise to the formation of International Environmental Agreements (IEAs) as a possible solution to limit global pollution effects. In this paper, we study the stability of IEAs in a repeated game framework where we restrict to strategies which are simple and invariant to renegotiation. Our main contribution is that we characterize necessary and sufficient conditions for stability of an IEA when pollution has both a global and local effect. Local pollution spillovers are represented by a network structure. We find that stable IEAs exist if the network structure is balanced. Too large asymmetries in the degree of local spillovers may, however, lead to non-existence of stable structures. We also discuss the implications of our results for welfare. The generality of our approach allows for several applications, in particular the provision of public goods. |
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| Keywords: | International environmental agreements Weak renegotiation-proofness Networks |
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