The Endogenous Formation of Economic Coalitions
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The Endogenous Formation of Economic Coalitions

  • The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development

Edited by Carlo Carraro

This important book, written by some of the leading scholars in the field, provides a comprehensive overview of recent advances in coalition theory and presents both the latest theoretical developments and novel applications in the field of economics.
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Chapter 6: Endogenous coalition formation in global pollution control: a partition function approach

Michael Finus and Bianca Rundshagen

Extract

6. Endogenous coalition formation in global pollution control: a partition function approach Michael Finus and Bianca Rundshagen 1. 1.1 INTRODUCTION General Remarks Concern about transboundary and global pollution problems ranks prominently on the agenda of international politics and has led to the signature of several international environmental agreements (IEAs), as for instance the Oslo Protocol on sulfur reduction in Europe in 1994, the Montreal Protocol on the depletion of the ozone layer in 1987, and the Kyoto Protocol on the reduction of greenhouse gases in 1997. This concern is also reflected in numerous recent papers (for example, Barrett (1997a, b); Botteon and Carraro (1997, 1998); Carraro and Moriconi (1998); Germain et al. (1996) and Germain et al. (1998)) on the formation of coalitions in international pollution control since the appearance of Barrett (1991), Bauer (1992) Black et al. (1992), Carraro and Siniscalco (1991), Chander and Tulkens (1992), Hoel (1992) and Tulkens (1979). The fundamental assumption of all models is that IEAs must be self-enforcingly designed since there is no international agency that can establish binding agreements (Endres, 1997). Consequently, the main problem of cooperation in international pollution control is that of freeriding. In reality there are two types of free-riding that negatively affect the success of an IEA (Finus, 2002). The first type of free-riding is the incentive of a country to remain a non-signatory or to take on less climate responsibility than other countries, thus benefiting from the higher abatement efforts of neighboring countries. The...

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