Essays on Climate Change Agreements

Abstract

The purpose of the first paper is to provide an overview of papers on climate change agreements under uncertainty. We aim to state the importance of the topic, describe the theoretical approaches and models used in the literature, and to summarise the main conclusions. We also try to identify the differences on assumptions made in the papers, as well as their limitations.

In the second paper, we consider learning-by investment in research that reduce the systematic uncertainty about the damages of climate change. We analyse a coalition model in which countries choose their membership, their level of research and abatement. Countries can cooperate on all issues or only some (full vs partial cooperation) and we consider different degrees of knowledge spillovers. We show that even though modesty in the form of partial cooperation may generate larger stable agreements, full cooperation tends to generate higher global welfare in equilibrium. Moreover, surprisingly, if countries cooperate on abatement, knowledge spillovers lead not to smaller but larger stable agreements with higher global welfare, suggesting that research output should be publicly available and not exclusive.

In the third paper, we aim to determine a credible scenario without issue linkage to investigate the effects of issue linkage in terms of free-riding and global welfare. In our paper, we combine three cooperation scenarios under one game. In stage one, countries choose between three different agreement designs with different cooperation rules on investment in research to reduce the systematic uncertainty about the damages of climate change, and abatement or remain an outsider. In stage two and three, members choose their investment in research and abatement following the cooperation rules of the agreement design they have chosen in the first stage, and non-members act non-cooperatively. Our simulation results suggest that full issue linkage does not generally improve the size of the stable coalition that cooperates on both investment in research and abatement. Moreover, the equilibrium global welfare is generally higher under the case of no issue linkage.

Date of Award	19 Feb 2020
Original language	English
Awarding Institution	University of Bath
Supervisor	Javier Rivas Ruiz (Supervisor), Peter Postl (Supervisor) & Michael Finus (Supervisor)