Self-Enforcing International Environmental Agreements and Trade: Taxes Versus Caps

Arbeitspapier

This paper studies within a multi-country model with international trade the stability of international environmental agreements (IEAs) when countries regulate carbon emissions either by taxes or caps. Regardless of whether coalitions play Nash or are Stackelberg leaders the principal message is that the choice of caps or taxes matters. International trade and tax regulation are necessary conditions for the existence of the encompassing self-enforcing IEA, and that the latter is attained the more likely, the less severe the climate damage. Hence, cap regulation is inferior to tax regulation insofar as in case of the former there exist no large and effective self-enforcing IEAs, in particular not the encompassing self-enforcing IEA. Further results are that for the formation of encompassing self-enforcing IEAs it does not matter whether climate coalitions play Nash or are Stackelberg leaders or whether fossil fuel is modeled as a consumer good or an intermediate good.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4954

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; International Economic Order and Integration ; Environmental Economics: General ; Environmental Economics: Government Policy
• Subject: cap ; tax ; international trade ; self-enforcing environmental agreements ; Nash ; Stackelberg

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Eichner, Thomas ; Pethig, Rüdiger
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/102168
• Last update: 10.03.2025, 11:44 AM CET