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Title: International Environmental Agreements and Trading Blocks — Can Issue Linkage Enhance Cooperation?
Authors: Strantza, Stefania
Sartzetakis, Eftichios S.
Diamantoudi, Effrosyni
Type: Article
Subjects: FRASCATI::Social sciences::Economics and Business::Economics
FRASCATI::Social sciences::Economics and Business::Economics
Keywords: Environmental agreements
International trade
Issue Date: 2020
Source: Strategic Behavior and the Environment
Volume: 8
Issue: 3
First Page: 269
Last Page: 310
Abstract: This paper examines the effect of designing international agreements that jointly determine environmental and trade policies on the participation level and aggregate welfare. This paper builds on the non-cooperative game approach of the International Environmental Agreements (IEAs) literature extending the basic model by introducing firms that trade in a global market. Countries choose the level of a tax on emissions and a tariff on imports: signatories enjoy tariff-free trade among themselves, impose a tariff to nonsignatories and a common emissions tax; nonsignatories levy a tariff on imports and a tax on domestic emissions. Resorting to numerical simulations, the paper shows increased participation to the joint agreement of around 70% of the total number of countries. These coalitions are not only much larger than the two-country coalition derived in the case without trade, but they also achieve substantial welfare improvements of around 60% of the welfare improvement the grand coalition provides over the coalition of two. The paper presents a series of numerical simulations to confirm the robustness of these results to changes in the parameters values.
ISSN: 1944-012X
Other Identifiers: 10.1561/102.00000096
Appears in Collections:Department of Economics

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