Technology spillovers and stability of international climate coalitions

Cooperation in international environmental agreements appears difficult to attain because of strong free-rider incentives. This paper explores how different technology spillover mechanisms among regions can influence the incentives to join and stabilise an international agreement. We use an applied modelling framework (STACO) that enables us to investigate the stability of partial climate coalitions. Several theories on the impact of technology spillovers are evaluated by simulating a range of alternative specifications. We find that spillovers are a good instrument to increase the abatement efforts of coalitions and reduce the associated costs. In our setting, however, they cannot overcome the strong free-rider incentives that are present in larger coalitions, i.e. technology spillovers do not substantially increase the success of international environmental agreements. This conclusion is robust with respect to the specification of technology spillovers.

Nash bargaining solutions for international climate agreements under different sets of bargaining weights

Bargaining is a tool to share collaborative gains and to facilitate reaching agreement. To improve incentives to join an international climate agreement (ICA), the Nash bargaining solution can be used to distribute cooperative gains across signatories. In this paper, we examine how the formation of ICAs and their mitigation efficiency are impacted by the use of the Nash bargaining solution. In a Nash bargaining game with heterogeneous players, bargaining powers are unequal and may be driven by different characteristics of the players. We employ different sets of asymmetric bargaining weights in order to examine the effectiveness of climate coalitions that emerge as stable agreements. Using the Nash bargaining solution, we obtain results from the stability of coalition model (STACO). We find that the Nash bargaining solution can improve the participation incentives and performances of ICAs as compared to agreements that do not redistribute gains from cooperation, but its capacity to overcome free-riding incentives is limited. However, if Nash bargaining accounts for outside options of players, we find larger stable coalitions and higher global abatement levels. In fact, Nash bargaining with outside options can stabilise the largest coalitions that can possibly be stable in our game.     

Medical liability and health care reform

We examine the impact of the Affordable Care Act (ACA) on medical liability and the controversy over whether federal medical reform including a damages cap could make a useful contribution to health care reform. By providing guaranteed access to health care insurance at community rates, the ACA could reduce the problem of under-compensation resulting from damages caps. However, it may also exacerbate the problem of under-claiming in the malpractice system, thereby reducing incentives to invest in loss prevention activities. Shifting losses from liability insurers to health insurers could further undermine the already weak deterrent effect of the medical liability system. Republicans in Congress and physician groups both pushed for the adoption of a federal damages cap as part of health care reform. Physician support for damages caps could be explained by concerns about the insurance cycle and the consequent instability of the market. Our own study presented here suggests that there is greater insurance market stability in states with caps on non-economic damages. Republicans in Congress argued that the enactment of damages caps would reduce aggregate health care costs. The Congressional Budget Office included savings from reduced health care utilization in its estimates of cost savings that would result from the enactment of a federal damages cap. But notwithstanding recent opinions offered by the CBO, it is not clear that caps will significantly reduce health care costs or that any savings will be passed on to consumers. The ACA included funding for state level demonstration projects for promising reforms such as offer and disclosure and health courts, but at this time the benefits of these reforms are also uncertain. There is a need for further studies on these issues.     

International Environmental Agreements for biodiversity conservation: a game-theoretic analysis

This paper contributes to the emerging literature on International Environmental Agreements with an analysis of key characteristics for biodiversity conservation. We study three features that are specific to an international conservation agreement: the existence of a natural upper bound of conservation in each country, the importance of local benefits, and the subadditivity of the global conservation function. We consider asymmetries in benefits and costs of conservation and, separately, in the upper bound of conservation in each country, and we examine the impacts of these features on coalition stability and on the effectiveness of biodiversity agreements. Results show that subadditivity of the global conservation function can lead to larger stable coalitions. The inclusion of a transfer scheme that might be implemented through, e.g., international trade of biodiversity credits, can have an impact on coalition composition and can improve conservation outcomes and the size of stable coalitions in certain ranges of the parameter space.     

China,the United States,bargaining, and climate change

Knowing what is at stake in terms of likely damages from accumulating greenhouse gases, how can major emitters fail to reach agreement on limits? Bargaining analysis suggests that an uneven distribution of abatement costs over time may play a significant part. Using a stylized, complete-information model of the strategic space facing the two largest emitters of greenhouse gases, China and the United States, a simple numerical example reaches a strong and surprising conclusion: To be feasible under current technological and economic conditions, any international agreement on climate change will have to allocate a level of future emissions for carbon dioxide in China that is at least twice as large as the level for the United States, in order to account for the effects on Chinese interests from continued economic growth.     

Science and Policy in International Environmental Agreements: Lessons from the European experience on Transboundary Air Pollution

Science and policy come together in the use of computer models for International Environmental Agreements (IEAs). We study a successful case in using Integrated Assessment Models (IAMs) in defining the long-range transboundary air pollution policies in Europe. In the light of the history of the LRTAP Convention of the UN-ECE, we consider the special circumstances which led to the success of the RAINS model that was employed. We find that the collaborative, self-aware and evolutionary character of the institutional framework built among the LRTAP Convention, IIASA and the EU facilitated the successful adoption of RAINS. We also show how the limits of computer models, fully recognised in this case by producers and users, leave issues of uncertainty, distribution and ethics unresolved. When facing international negotiations, several coalitions might emerge. An analysis of the situtation is done in terms of First-Comers and Late-Comers in Environmental policy, the first group undertaking the initiative to formulate international policies on issues that are of concern to themselves and for which they have acquired technologies, models and know-how, while the second group is just following international policy and most often viewing it as a constraint. This is discussed in the example of the Spanish participation in the negotiations about sulphur emissions in the buildup to the Oslo Protocol. The adoption of the precautionary principle is often being used as a way to handle uncertainty when facing urgent policy responsibilities for environmental issues.     

Measures to enhance the success of global climate treaties

We analyze important forces that hamper the formation of successful self-enforcing agreements to mitigate global warming from an economic point of view. The analysis combines two modules: (a) an integrated assessment model that captures the feedback between the economy, environmental damages and the climate system and (b) a game theoretic model that determines stable coalitions in the presence of free-riding incentives. We consider two types of measures to enhance the success of international environmental treaty-making: (a) transfers, aiming at balancing asymmetric gains from cooperation; (b) institutional changes, aiming at making it more difficult to upset stability of a treaty. We find that institutional changes may be as important as transfers and should therefore receive more attention in future international negotiations.

Climate justice and bargaining coalitions: a discourse analysis

This article adopts a perspective of climate justice as an object of discourse and takes the bargaining coalitions at the Conference of the Parties as the relevant units to map the heterogeneous discourse on climate justice at the Cancun COP16. Based on the statements of nine coalitions, the analysis identifies three discourses on climate justice. The conflict discourse articulates the North–South duality over issues of historical responsibility for climate change. The transition discourse points to solving the problem of sharing the cost of mitigating climate change through a process of global low-carbon growth. The vulnerability discourse focuses on the urgency of ambitious actions by all parties. These three discourses, and their appropriation by the bargaining coalitions, are inherent of new alignments among developed and developing countries alliances and blocs that simultaneously reproduce and surpass the North–South ideological divide.     

Climate change coalition formation and equilibrium strategies in mitigation games in the post-Kyoto Era

This paper analyzes the formation of country coalitions in the context of international negotiations on climate change mitigation and simulates the emergence of an equilibrium solution in this game-theoretic framework, while accounting for the interplay with external influences. Coalition formation is gauged through clustering analysis on multiple factors including natural, economic, and social factors, RCPs, and other aspects. Projected emission is found to be the main determinant in forming coalitions, and the USA, EU, China?+?India, and the rest of the world constitute the four-coalition configuration that is stable across different scenarios. Under this base configuration, the Regional Integrated Climate-Economy model for Coalition Game model is implemented to assess the sensitivity of equilibrium solutions to parameter uncertainties, sanctions on non-mitigation, and adjustments in coalition composition. The main conclusion of the game simulations is that no coalition would adopt a mitigation strategy at the Nash equilibrium if no penalty is in place. The Nash equilibrium remains stable even when the climatic and economic parameters are disturbed. As an alternative to the conventional game, an external sanction is imposed on coalitions that choose not to mitigate climate change; in this scenario, climate change mitigation propagates across coalitions according to various sanction levels. The paper also shows that a social welfare compensation between two coalitions may alter the equilibrium game strategy depending on whether the compensation outweighs the welfare loss from mitigation.     

Distributional Conflicts and the Timing of Environmental Policy

This paper examines the timing of adopting a policy for tackling an environmental issue such as climate change from a viewpoint of distributional conflicts. A dynamic game of providing public goods (Alesina and Drazen, American Economic Review 81(5), 1170–1118 (1991)) is applied to the argument, modified by including abatement costs as well as the loss in the environment. In this framework, even if the immediate adoption of environmental policy is socially optimal, a disproportionate burden of pollution reduction leads to a delay in policy adoption. This is because the disproportionate burden increases the gain from waiting for each individual hoping that the other will agree to bear the heavier burden. The impact of income distribution on the timing is also examined. The level of averting behavior is assumed to depend on the level of income. If the distribution of income is more dispersed, the regional disparities in environmental degradation become larger because the poor tend to avert less and get more loss than the rich due to their tighter budget constraints. Under asymmetric information on damages, as the disparities in income become more dispersed, each individual expects that his/her opponent’s damage becomes severe; then, he/she gives in first. Thus, each individual holds out longer so that the timing of policy implementation is delayed further. Finally, the theoretical result is empirically tested by both probit and discriminant analyses to examine whether income distribution has an impact on the timing of ratifying the Kyoto Protocol in practice.     

Those crazy transaction costs: on the irrelevance of the equivalence between monetary damages and specific performance

The Coase theorem tells us that monetary damages and specific performance remedies for breach of contract have identical effects when transaction costs are zero. This has become a standard part of the literature on the economics of contract law. This note argues that the traditional view is somewhat misguided, as monetary damages and specific performance remedies are unnecessary in a zero transaction costs world. We go on to show how the presence of transaction costs impact the decisions of contracting parties as between the inclusion of liquidated damages clauses in contracts and resorting to litigation that could result in the application of either monetary damages or specific performance remedies.     

What drives national support for multilateral climate finance? International and domestic influences on Australia’s shifting stance

The fulfilment of wealthy countries’ commitment to mobilise $100 billion a year in climate finance by 2020 will hinge on maintaining domestic political support in contributor countries. Predictability in flows of climate finance is likely to enhance the overall stability of the climate finance system and the broader climate regime. However, at present it remains unclear how the 2020 target will be achieved and little is known about what drives fluctuations in support among contributor countries. This article explores domestic and international factors that may explain fluctuations in national support through a case study of Australia’s climate finance from 2007 to 2015. Drawing on documentary analysis and interviews with officials and stakeholders, the paper tracks two domestic factors that may influence support for climate finance—the government’s political orientation and public concern about climate change—and two international factors—commitment to multilateral agreements and international peer pressure. While some accounts view climate policy choices as being driven primarily by domestic factors, we find that the government’s political orientation on domestic climate policy and aid explains some but not all variations in Australia’s stance on climate finance. International peer group effects have moderated the positions of two governments that were otherwise reluctant to act on climate change. National policy reforms combined with improved multilateral oversight and more established replenishment cycles could bolster support in contributor countries and thereby strengthen the capacity of the climate finance system.     

Equity, international trade and climate policy

The literature of welfare-maximising greenhouse gas emission reduction strategies pays remarkably little attention to equity. This paper introduces various ways to consider efficiency and equity simultaneously. Lower (higher) discount rates lead to higher (lower) emission reduction. Higher (lower) inequity aversion leads to higher (lower) emission abatement, unless one also considers the negative effects of OECD emission reduction on the exports of developing countries; in that case, the effect of inequity aversion is ambiguous. In the absence of international co-operation, higher (lower) risk aversion leads to lower (higher) emission abatement. With international co-operation, the effect of risk aversion is ambiguous because the higher risk aversion gives more weight to poorer regions and poorer generations. We analyse four ways to introduce compassion in a non-cooperative setting. If observed development aid is a guide, international altruism is small and has little impact on optimal emission control. If countries act as if they 'feel' but not 'physically experience' the climate impact of the most vulnerable country, optimal emission reduction increases, but not substantially so. However, if countries actually have to pay for the damage done, they would prefer to reduce their emissions to much lower levels. Finally, if countries pay as much for emission reduction as other countries suffer from climate change, (that is, if climate policy restores the income distribution to what it would have been without climate change), emissions are rapidly cut to very low levels.     

Criteria for Evaluation of Burden-sharing Rules in International Climate Policy

This article presents nine criteria for assessing, comparing, and ranking burden-sharing rules and conceptual frameworks used in climate policy negotiations and agreements. Three of the criteria are concerned with fairness principles and six criteria are operational requirements. The application of these criteria is illustrated in the context of six different burden-sharing schemes. The Multi-sector Convergence approach and the Triptych approach received highest average score of the six schemes. The Brazilian proposal received a similar total score, but unevenly distributed with a high score on fairness principles and low score on operational requirements. The European Union member countries employed the Triptych approach when they differentiated their national abatement targets prior to the 1997 Kyoto meeting. The Multi-sector Convergence approach was developed in a joint ECN (Netherlands Energy Research Foundation) and CICERO (Center for International Climate and Environmental Research – Oslo) project. It is a sector-based, global approach that comprises convergence of per capita emissions at the same level in all countries. Sector-based approaches have a distinct advantage compared to other approaches because they reflect the economic structure of countries rather well. Such approaches could play a useful role in future climate policy negotiations, not the least in discussions on binding climate targets for developing countries.     

Agenda Control in Congress: Evidence from Cutpoint Estimates and Ideal Point Uncertainty

This article develops two new tests of partisan and nonpartisan theories of lawmaking based on cutpoint estimates and measures of uncertainty about ideal point estimates. Theories of congressional organization make explicit predictions about the absence of cutpoints in certain intervals of the policy space. We test these theories with new cutpoint estimates and exploit the fact that the ideal points of members located far from the density of cutpoints are necessarily estimated with less precision. We validate our empirical approach through simulations, and we test three models of congressional organization using House roll call data from the 86th through the 110th Congresses (1959–2008). We find strong evidence of partisan agenda control. Our findings exhibit modest differences from the results predicted by Cox and McCubbins's party cartel theory: negative agenda control increases over time and is negatively correlated with the size of the blockout region.     

Supply and demand structure for international offset permits under the Copenhagen Pledges

International carbon offsets from developing countries and emerging economies, such as permits from the clean development mechanism, could potentially play an important role for cost containment in domestic greenhouse gas regulation by industrialised countries. Assuming that major emitters such as the EU, the USA, Canada, Japan, Australia and New Zealand implement the “Copenhagen Pledges” and seek cost containment, the potential demand for offset permits is estimated to be 627–667 MtCO₂e per year. To describe the supply structure, marginal abatement cost curves for developing countries and emerging economies are derived. Developing countries and emerging economies could supply 627–667 MtCO₂e p.a. at costs of approximately EUR 10 (in 2004 EUR), neglecting transaction costs and country-specific risks. The highest potentials for the generation of carbon offsets are present in China, India and the rest of Asia.     

A Race for the Regs: Unified Government,Statutory Deadlines,and Federal Agency Rulemaking

Theory suggests that Congress should delegate more policymaking authority to the bureaucracy under unified government, where lawmakers are less worried about the president orchestrating “bureaucratic drift.” Yet, all unified governments come to an end, making broad delegations potentially advantageous to future lawmaking coalitions (“coalitional drift”). We seek to assess how lawmakers simultaneously limit the risk of each of these pitfalls of delegation. Our answer is rooted in Congress’s ability to spur agency rulemaking activity under unified government. Specifically, we expect statutes passed under unified government to require agencies to issue regulations quickly and for enacting coalitions to use oversight tools to influence agency policy choices. Such “proximate oversight” allows coalitions to cement policy decisions before a new election changes the configuration of preferences within Congress and the executive branch. We assess our argument using unique data on both congressional rulemaking deadlines (1995–2014) and the speed with which agencies issue regulations (1997–2014).     

Fostering a triple response mechanism to combat global climate change: Emission abatement,carbon capture and water improvement

The Kyoto Protocol has established emission abatement and carbon sink increase to cope with climate change. However, in recent years, developed countries tend to focus more on the former. The simplifying of GHG causes has posed challenges for the understanding of climate change issues and for the development of consequent counter-measures, leading to present controversy and dilemma over mechanisms to combat global climate change. It is held that a desirable global cooperative stance should be “harmonious but differentiated,” i.e., the division of responsibilities and co-operation among the countries should be conducted after the diversities of different countries are recognized in terms of climate change, interests and functions. To meet this end, it is necessary to have UNFCCC play a leading role, under which emission abatement, carbon sink and water cycle improvement are concurrently reinforced. Under this triple mechanism, industrialized countries ought to continue to take the lead in emission abatement, while developing countries, especially those with great potentialities to strengthen carbon sink and water conservancy, ought to conduct ecological preservation and to develop hydraulic capacity so as to strengthen the natural carbon cycle and water cycle to combat climatic impacts.     

Defensive Gun Uses: New Evidence from a National Survey

The number of civilian defensive gun uses (DGUs) against criminal attackers is regularly invoked in public policy debates as a benefit of widespread private ownership of firearms. Yet there is considerable uncertainty for the prevalence of civilian DGUs, with estimates ranging from 108,000 (using the National Crime Victimization Survey) to 2.5 million (using smaller telephone surveys) per year. In this paper we analyze the results of a new national random-digit-dial telephone survey to estimate the prevalence of DGU and then discuss the plausibility of the results in light of other well-known facts and possible sources of bias in survey data for sensitive behaviors. Because DGU is a relatively rare event by any measure, a small proportion of respondents who falsely report a gun use can produce substantial overestimates of the prevalence of DGU, even if every true defensive gun user conceals his or her use. We find that estimates from this new survey are apparently subject to a large positive bias, which calls into question the accuracy of DGU estimates based on data from general-population surveys. Our analysis also suggests that available survey data are not able to determine whether reported DGU incidents, even if true, add to or detract from public health and safety.     

Let's Talk about Climate Change: Disclosure Is Coming

In this article, I review the newly released draft ASTM International standard on climate change disclosure. Many parties, from investors to state agencies, are calling for a consistent, comprehensive approach to disclosure of material financial impacts attributed to climate change. Disclosures range from costs associated with compliance to new laws to more general risk management strategies adopted by corporations. This article summarizes some of the key features of the draft standard and encourages participation in the development process.