Stability of International Environmental Agreements under Isoelastic Utility

29 Pages Posted: 2 Dec 2019 Last revised: 22 Dec 2019

See all articles by Bruno Nkuiya

Bruno Nkuiya

Rensselaer Polytechnic Institute (RPI) - Department of Economics

Date Written: November 16, 2019

Abstract

There is now a growing consensus that ratifying International Environmental Agreements (IEAs) is the most effective way to tackle trans-boundary pollution problems. While the Social Benefit Function (SBF) critically affects emission choices as well as decisions to ratify IEAs, the related economic literature has mainly concentrated on scenarios where the marginal SBF is linear. Using climatic data, I find that the linear marginal SBF case does not match data and isoelastic SBFs fit data better. In the more realistic, but not yet explored, context of isoelastic SBFs, I reconsider incentives to ratify IEAs. My analysis gives rise to novel conclusions. For instance, changes in the scale of damages do not a ect the level of cooperation. When the scale of damages is small, variations of the SBF parameter reveal that large coalitions including the coalition of all countries are stable, but only when the potential gain from cooperation is sufficiently high.

Keywords: International Agreements; Trans-boundary Pollution; Isoelastic Utility; Quadratic Damage Function; Strategic Behaviors

JEL Classification: D62; F53; H41; Q54

Suggested Citation

Nkuiya, Bruno, Stability of International Environmental Agreements under Isoelastic Utility (November 16, 2019). Resource and Energy Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3488236

Bruno Nkuiya (Contact Author)

Rensselaer Polytechnic Institute (RPI) - Department of Economics ( email )

110 8th Street
Troy, NY 12180
United States

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