Climate Agreements In A Mitigation-Adaptation Game

Breton M, Sbragia L (2019) The impact of adjustment on the stability of international agreements on the environment. About Resource Econ 74 (2): 697-725 The M-A game generally leads to a higher welfare balance than the M-Game. This is because there are two instruments that reduce the cost of climate change and, at first, two instruments can never be less efficient than one. However, gains are small and the CPI index still weak. Finally, if the strategies are substitutes (supplements), then the total reduction level is lower (more) in the game M-A than in the M-Game. The mitigation gap increases with the inclination of the reaction function in the adjustment space of the reduction, i.e. it is important in absolute terms. In a positive-looking game, profitability is a necessary condition for forming a coalition. The size coalition is profitable if each signatory gets a higher salary within the coalition, rather than in a non-cooperative Nash balance. In formal terms, profitability can be written: in the reduction game, our simulations confirm the analytical results of Bayramoglu et al. (2018), because the two games do not differ. Stable coalitions can be formed by up to 2 players.

In addition, we can describe this result by showing that cooperation takes place when mitigation response functions are very flat. This can be intuitively explained by the fact that low-slope- down response functions produce less incentives outdoors. Finally, we also note that the stable coalition with two players brings little improvement over non-cooperation (small consumer price index) and therefore remains far removed from the welfare improvements that may be possible in full cooperation. As far as freeride incentives are concerned, profitability is not a sufficient condition for the establishment of a climate agreement. Stability is also needed. According to most of the IEA literature, we use the open rule of membership (D`Aspremont et al. 1983), i.e. players can join the coalition and leave it without the consensus of others. Therefore, stability should be both internal and external. We can draw two important political implications from our work. The first is that a common negotiation on mitigation and adaptation always seems better. While the mitigation and adjustment of substitutes and reaction functions decrease, adjustment increases the number of stable coalitions.

This is a potentially positive message in the context of a fragmented regime or a bottom-up approach to climate negotiations, as advocated by the Paris Agreement. By supporting adaptation in developing countries, for example, developed countries could stimulate the creation of “clubs” that could be a starting point for achieving new mitigation targets. If mitigation and adaptation are complementary and the reaction function is negative, joint negotiations on mitigation and adaptation can lead to the formation of a broad, stable coalition. However, we show a second, less positive view here. In fact, we have shown that complementarity is facilitated when the effectiveness of adaptation is related to the level of mitigation, as many authors have suggested. Nevertheless, this condition also reduces the ability to observe top-down reaction functions, which is essential for large coalitions. This indicates that “nature” is also one element of complementarity and that, in some cases, it may reduce the room for manoeuvre for the establishment of a grand coalition for climate protection, which improves well-being.

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