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  Prices vs quantities for international environmental agreements

Kornek, U., Marschinski, R. (2018): Prices vs quantities for international environmental agreements. - Oxford Economic Papers, 70, 4, 1084-1107.
https://doi.org/10.1093/oep/gpy016

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Kornek, Ulrike1, Author              
Marschinski, Robert1, Author              
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1Potsdam Institute for Climate Impact Research, ou_persistent13              

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 Abstract: Does the choice between price-based or quantity-based regulation matter for the formation of an international environmental agreement (IEA)? We introduce abatement cost uncertainty in a standard coalition formation model and let countries choose their preferred regulatory instrument. It is shown that a coalition of cooperating countries is more likely to prefer a quantity regulation than non-cooperating countries. However, uncertainty also aggravates free-riding whenever the endogenous preference of the coalition is to implement quantities, which implies lower equilibrium participation than in the benchmark case without uncertainty. A restriction to price-based agreements can lead to higher participation, but does not necessarily raise global welfare. Tradable quantities can both increase participation in the agreement and achieve higher global welfare. Overall, our results suggest that free-riding incentives in global public good problems with uncertainty may be underestimated if the strategic implications of instrument choice are ignored.

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 Dates: 2018
 Publication Status: Finally published
 Pages: -
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 Table of Contents: -
 Rev. Type: Peer
 Identifiers: DOI: 10.1093/oep/gpy016
PIKDOMAIN: Sustainable Solutions - Research Domain III
eDoc: 8422
Research topic keyword: Climate Policy
Research topic keyword: Economics
Research topic keyword: Global Commons
Model / method: Game Theory
Model / method: Agent-based Models
Regional keyword: Global
Organisational keyword: RD3 - Transformation Pathways
 Degree: -

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Title: Oxford Economic Papers
Source Genre: Journal, SCI, Scopus
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Pages: - Volume / Issue: 70 (4) Sequence Number: - Start / End Page: 1084 - 1107 Identifier: Other: 1464-3812
ISSN: 0030-7653
Other: HighWire Press
Other: Oxford University Press (OUP)
CoNE: https://publications.pik-potsdam.de/cone/journals/resource/oxford-economic-papers