Parallel Climate Blocs. Incentives to cooperation in international climate negotiations

There are increasing signals that countries that negotiate on GHG emission control are unlikely to sign and ratify a single climate protocol, even though almost all countries have subscribed the UNFCCC convention that sets the framework of international climate cooperation. In addition to the US decision not to ratify the Kyoto Protocol, New Zealand and Australia recently led to the formation of a new alliance in which technological cooperation is the main tool to achieve GHG emission control. In the U.S., some States on the Eastern coast are negotiating to adopt emission reduction targets and to establish a permit market despite the opposition of the federal government. Cooperation on climate policy is also the objective of recent negotiations between ASEAN countries. Given this background, this paper aims at examining whether the aforementioned events are simply the noise of a political process leading to a global agreement on climate change control or are instead consistent with some basic economic incentives that are pushing countries towards the formation of two (or more) parallel climate blocs. To this aim, this paper uses a well known integrated assessment climate-economy model to evaluate the incentives to cooperation in climate negotiations for the main world countries. A game-theoretic framework is adopted to analyse a country’s incentive to belong to a climate coalition. In our setting, a given country can either join one of the existing climate coalitions or can propose a new one or can decide to free-ride on the other countries’ cooperative abatement effort. We then analyse the characteristics of the main possible outcomes and assess which outcomes are most likely to prevail in future negotiations, at least as far as economic incentives are concerned.Agreements, Climate, Incentives, Negotiations, Policy

China and the Evolution of the Present Climate Regime

The recent events that followed the US decision not to comply with the Kyoto Protocol seem to drastically undermine the effectiveness of the Protocol in controlling GHG emissions. Therefore, it is important to explore whether there are economic factors and policy strategies that might help the US to modify its current policy and move back to the Kyoto-Bonn agreement. For example, can an increased participation of developing countries induce the US to effectively participate in the effort to reduce GHG emissions? Is a single emission trading market the appropriate policy framework to increase participation in the Kyoto-Bonn agreement? This paper addresses the above questions by analysing whether the participation of China in the cooperative effort to control GHG emissions can provide adequate incentives for the US to move back to the Kyoto process and eventually ratify the Kyoto Protocol. This paper analyses three different climate regimes in which China could be involved and assesses the participation incentives for the major world countries and regions in these three regimes.Agreements, Climate, Incentives, Negotiations, Policy

Climate Policy and Economic Growth in Developing Countries

Although developing countries face a drastic increase in their greenhouse gas emissions, mitigation actions against climate change do not rank high among their priorities. The obvious reason lies in the necessity for them to continue the development process, which is characterised by pressing needs other than emission control. For developing countries the real problem is thus not emissions but economic growth. Therefore the key question is whether or not the Kyoto Protocol provides an opportunity for growth and thus for their economic development. The only way to accelerate the participation of developing countries in climate agreements - and therefore to come closer to the goal of a global climate control - is to design strategies which enable their economic development. The dilemma of reducing emissions on a global scale while ensuring growth in the poorer regions can only be solved if there are possibilities embedded in the agreements which can contribute to the sustainable development of those regions. As a consequence, greater emphasis must be placed on the economic development dimension of the Kyoto Protocol as far as the impact on developing countries is concerned.Climate Policy, Environmental Modeling, Integrated Assessment, Technical Change

Regional and sub-global climate blocs. A game-theoretic perspective on bottom-up climate regimes

controlling GHG emissions without the involvement of countries such as China, India, the United States, Aust rali a, and possibly other developing countries. This highlights an unambiguous weakness of the Kyoto Protocol, where the aforementioned countries either have no binding emission targets or have decided not to comply with their targets . Therefore, when discussing possible post-Kyoto scenarios, it is crucial to priori tise part icipation incentives for all countries, especially those without explicit or with insufficient abatement targets. This paper offers a bottom-up game-theoretic perspective on participation incentives. Rather than focusing on issue linkage, t ransfers or burden sharing as tools to enhance the incentives to par t icipate in a climate agreement, thi s paper aims at exploring whether a di fferent policy approach could lead more count ries to adopt ef fective climate cont rol policies. This policy approach is explicitly bottom-up, namely i t gives each country the freedom to sign agreements and deals, bilateral ly or multila terally, with other countries, without being constrained by any globa l protocol or convention. This study provides a game-theoretic assessment of this policy approach and then evaluates empirically the possible endogenous emergence of single or multi ple climate coalitions. Welfare and technological consequences of different mul tiple bloc climate regimes will be assessed and their overall environmental effectiveness will be discussed.Agreements, Climate, Incentives, Negotiations, Policy

Regional and Sub-Global Climate Blocs.A Game-Theoretic Perspective on Bottom-up Climate Regimes

No international regime on climate change is going to be fully effective in controlling GHG emissions without the involvement of countries such as China, India, the United States, Australia, and possibly other developing countries. This highlights an unambiguous weakness of the Kyoto Protocol, where the aforementioned countries either have no binding emission targets or have decided not to comply with their targets. Therefore, when discussing possible post-Kyoto scenarios, it is crucial to prioritise participation incentives for all countries, especially those without explicit or with insufficient abatement targets. This paper offers a bottom-up game-theoretic perspective on participation incentives. Rather than focusing on issue linkage, transfers or burden sharing as tools to enhance the incentives to participate in a climate agreement, this paper aims at exploring whether a different policy approach could lead more countries to adopt effective climate control policies. This policy approach is explicitly bottom-up, namely it gives each country the freedom to sign agreements and deals, bilaterally or multilaterally, with other countries, without being constrained by any global protocol or convention. This study provides a game-theoretic assessment of this policy approach and then evaluates empirically the possible endogenous emergence of single or multiple climate coalitions. Welfare and technological consequences of different multiple bloc climate regimes will be assessed and their overall environmental effectiveness will be discussed.Agreements, Climate, Incentives, Negotiations, Policy

Emissions Trading Regimes and Incentives to Participate in International Climate Agreements

This paper analyses whether different emissions trading regimes provide different incentives to participate in a cooperative climate agreement. Different incentive structures are discussed for those countries, namely the US, Russia and China, that are most important in the climate negotiation process. Our analysis confirms the conjecture that, by appropriately designing the emission trading regime, it is possible to enhance the incentives to participate in a climate agreement. Therefore, participation and optimal policy should be jointly analysed. Moreover, our results show that the US, Russia and China have different most preferred climate coalitions and therefore adopt conflicting negotiation strategies.Agreements, Climate, Incentives, Negotiations, Policy

Using Data Envelopment Analysis to Assess the Relative Efficiency of Different Climate Policy Portfolios

Within the political, scientific and economic debate on climate change, the process of evaluating climate policies ex-ante, during and/or ex-post their lifetime, is receiving increasing attention from international institutions and organisations. The task becomes particularly challenging when the aim is to evaluate strategies or policies from a sustainability perspective. The three pillars of sustainability should then be jointly considered in the evaluation process, thus enabling a comparison of the social, the environmental and the economic dimensions of the policy’s impact. This is commonly done in a qualitative manner and is often based on subjective procedures. The present paper discusses a data-based, quantitative methodology to assess the relative performances of different climate policies, when long term economic, social and environmental impacts of the policy are considered. The methodology computes competitive advantages as well as relative efficiencies of climate policies and is here presented through an application to a sample of eleven global climate policies, considered as plausible for the near future. The proposed procedure is based on Data Envelopment Analysis (DEA), a technique commonly employed in evaluating the relative efficiency of a set of decision making units. We consider here two possible applications of DEA. In the first, DEA is applied coupled with Cost-Benefit Analysis (CBA) in order to evaluate the comparative advantages of policies when accounting for social and environmental impacts, as well as net economic benefits. In the second, DEA is applied to compute a relative efficiency score, which accounts for environmental and social benefits and costs interpreted as outputs and inputs. Although the choice of the model used to simulate future economic and environmental implications of each policy (in the present paper we use the FEEM RICE model), as well as the choice of indicators for costs and benefits, represent both arbitrary decisions, the methodology presented is shown to represent a practical tool to be flexibly adopted by decision makers in the phase of policy design.Climate, Policy, Valuation, Data envelopment analysis, Sustainability