International Trade and the Negotiability of Global Climate Change Agreements

25 Pages Posted: 17 Feb 2009 Last revised: 12 Sep 2022

See all articles by John Whalley

John Whalley

University of Western Ontario - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for International Governance and Innovation (CIGI)

Yuezhou Cai

Chinese Academy of Social Sciences (CASS) - Institute of Quantitative & Technical Economics

Raymond G. Riezman

Aarhus University - Department of Economics and Business Economics; University of California, Santa Barbara (UCSB) - Department of Economics; University of Iowa - Henry B. Tippie College of Business - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); GEP; Aarhus University - School of Business and Social Sciences

Date Written: February 2009

Abstract

Country incentives to participate in cooperative arrangements which either fully or partially internalize climate change externalities from carbon emissions involve critical asymmetries. Small countries trade off own country costs of carbon mitigation actions against their own benefits from global improvements in climate which benefit all. Small countries thus have limited incentive to participate as their actions, while costly to them, have a significant impact on global temperature change which mainly benefits others. Here we build on the work of Shapley and Shubik (1969) which suggests that the core of a global warming game without transferable utility may be empty and use numerical simulation methods to analyse country incentives to participate in carbon emission limitation negotiations using a micro global warming structure related to that used by Uzawa(2003).We discuss how the presence of international trade in goods affects the willingness of countries to join international negotiations on climate change. We calibrate our simulation structure to business as usual scenarios for the period 2006-2036. We go significantly beyond the PAGE model relied on in the Stern (2006) report in capturing multi-country interactive effects on the benefit side of climate change mitigation. We show how the perceived severity of global climate change damage influences participation decisions, and importantly how international trade makes participation more likely.

Suggested Citation

Whalley, John and Cai, Yuezhou and Riezman, Raymond G., International Trade and the Negotiability of Global Climate Change Agreements (February 2009). NBER Working Paper No. w14711, Available at SSRN: https://ssrn.com/abstract=1344693

John Whalley (Contact Author)

University of Western Ontario - Department of Economics ( email )

London, Ontario N6A 5B8
Canada
519-661-3509, ext. 83509 (Phone)
519-661-3666 (Fax)

HOME PAGE: http://www.ssc.uwo.ca/economics/faculty/

National Bureau of Economic Research (NBER)

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CESifo (Center for Economic Studies and Ifo Institute)

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Germany

HOME PAGE: http://www.CESifo.de

Centre for International Governance and Innovation (CIGI) ( email )

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Canada

Yuezhou Cai

Chinese Academy of Social Sciences (CASS) - Institute of Quantitative & Technical Economics ( email )

No.5 Jianguomennei dajie
Beijing 100732
China

Raymond G. Riezman

Aarhus University - Department of Economics and Business Economics ( email )

Fuglesangs Allé 4
Aarhus V, 8210
Denmark

HOME PAGE: http://www.biz.uiowa.edu/faculty/rriezman/

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States

University of Iowa - Henry B. Tippie College of Business - Department of Economics ( email )

316 PBB
Iowa City, IA 52242
United States

HOME PAGE: http://www.biz.uiowa.edu/faculty/rriezman/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

GEP ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Aarhus University - School of Business and Social Sciences ( email )

Nordre Ringgade 1
Aarhus C, DK-8000
Denmark

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