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Climate thresholds and heterogeneous regions: Implications for coalition formation

  • Johannes EmmerlingEmail author
  • Ulrike Kornek
  • Valentina Bosetti
  • Kai Lessmann
Article

Abstract

The threat of climate catastrophes has been shown to radically change optimal climate policy and prospects for international climate agreements. We characterize the strategic behavior in emissions mitigation and agreement participation with a potential climate catastrophe happening at a temperature threshold. Players are heterogeneous in a conceptual and two numerical models. We confirm that thresholds can induce large, stable coalitions. The relationship between the location of the threshold and the potential for cooperation is non-linear, with the highest potential for cooperation at intermediate temperature thresholds located between 2.5 and 3 degrees of global warming. We find that some regions such as Europe, the USA and China are often pivotal to keeping the threshold because the rest of the world abandons ambitious mitigation and the threshold is crossed without their participation. As a result, their incentives to cooperate can be amplified at the threshold. This behavior critically depends on the characteristics of the threshold as well as the numerical model structure. Conversely, non-pivotal regions are more likely to free-ride as the threshold inverts the strategic response of the remaining coalition. Moreover, we find that our results depend on which equilibrium concepts is applied to analyze coalition formation as well as the introduction of uncertainty about the threshold.

Keywords

Tipping points International environmental agreements Climate change 

JEL Classification

C72 D62 H41 Q54 

Notes

Acknowledgments

We thank participants at the FEEM Workshop on Public Goods 2014, the 20th Coalition Theory Network Workshop in Venice, the 7th Atlantic Workshop on Energy and Environmental Economics in Atoxa, two anonymous referees, Alessandro Tavoni, Henry Tulkens, and Philippe Colo for very helpful comments. VB would like to acknowledge financial support from the ERC grant agreement n 336703 (RISICO). KL gratefully acknowledges financial support by the Federal Ministry of Education and Research (BMBF) program “Global Change 5 + 1” as part of the grant agreement 01LN1703A (FINFAIL). An earlier version of this paper has been circulating under the title “The catastrophe smile - The effect of climate thresholds on coalition formation”.

Supplementary material

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2020

Authors and Affiliations

  1. 1.RFF-CMCC European Institute on Economics and the Environment (EIEE), Centro Euro-Mediterraneo sui Cam-biamenti ClimaticiMilanoItaly
  2. 2.Mercator Research Institute on Global Commons and Climate Change (MCC)BerlinGermany
  3. 3.Potsdam Institute for Climate Impact Research (PIK)PotsdamGermany
  4. 4.Department of EconomisUniversità BocconiMilanoItaly

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