Skip to main content
SpringerLink
Log in

Economic determinants of multilateral environmental agreements

  • Published:
International Tax and Public Finance Aims and scope Submit manuscript

Abstract

We examine the economic factors that lead to the formation of multilateral environmental agreements, focusing on the likelihood a pair of countries enters into an agreement as well as the number of agreements they share using a near universe of agreements. Two countries are more likely to have an agreement and have more of them if they are economically larger and of similar economic size, closer in distance, have a preferential trade agreement, and trade more. Results are strongest for agreements involving a small number of countries, consistent with a hypothesis that agreements are formed to manage common pool resources.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Fig. 7
Fig. 8
Fig. 9

Similar content being viewed by others

Notes

  1. Technically speaking, there is an exception to this principle given that a number of members of the World Trade Organization, which one can consider to be a large trade agreement, have separate agreements governing trade issues pertaining to a subset of WTO members. The North American Free Trade Agreement is one example of such an agreement. It should be noted that most papers examining various aspects of trade agreements tend to focus on the smaller trade agreements and ignore the WTO given that most countries are members of the WTO. Unlike environmental agreements, Canada, the USA, and Mexico share only one trade agreement, NAFTA. In the case they both sign the same trade agreement with additional countries, the new agreement would replace NAFTA, as would have been the case with the now abandoned (by the USA) Trans Pacific Partnership agreement. The only plausible exception of this is the European Union if one treats EU members separately, in which case it may appear that EU members may be parties to multiple trade agreements amongst each other whenever the EU itself enters into trade agreements with other countries. However, whatever concessions the EU may provide in such agreements have no effect on the trade between EU members which is free of any policy intervention due to the nature of the EU itself.

  2. The source for this data is the Transboundary Waters Assessment Programme, http://www.getwap.org.

  3. For example, when signing the North American Free Trade Agreement, Canada, Mexico, and the USA also signed a side agreement, the North American Agreement on Environmental Cooperation which stipulated that each country must enforce its environmental laws and created a dispute settlement mechanism for enforcement purposes.

  4. Analogous results for other specifications are available on request from authors.

  5. In unreported results, we estimated our specifications with contemporaneous values but with a balanced panel of countries that are observed in every single year. This also resulted in negatively estimated coefficients for trade agreements. We then split the agreement dummy variable to identify two separate types of trade agreements: one-way agreements, largely Generalized System of Preferences granted by developed countries to developing countries, and reciprocal, two-way agreements in which both parties provide the same concessions and equal market access. Those results reveal that the negative effect of the single trade agreement variable is driven by one-way agreements. One-way trade preferences are rarely granted by countries in close proximity to each other. In other words, they are rarely granted by countries that share common pool resources and are less likely to engage in environmental agreements given the distance that separates them. The estimated coefficient on reciprocal, two-way agreements is always positive and significant. These results are available on request.

References

  • Asheim, G. B., Froyn, C. B., Hovi, J., & Menz, F. C. (2006). Regional versus global cooperation for climate control. Journal of Environmental Economics and Management, 51, 93–109.

    Google Scholar 

  • Baghdadi, L., Martinez-Zarzoso, I., & Zitouna, H. (2013). Are RTA agreements with environmental provisions reducing emissions? Journal of International Economics,90(2), 378–390.

    Google Scholar 

  • Baier, S. L., & Bergstrand, J. H. (2004). Economic determinants of free trade agreements. Journal of International Economics,64(1), 29–63.

    Google Scholar 

  • Baier, S. L., & Bergstrand, J. H. (2007). Do free trade agreements actually increase members’ international trade. Journal of International Economics,71(1), 72–95.

    Google Scholar 

  • Baldwin, R., & Jaimovich, D. (2012). Are free trade agreements contagious? Journal of International Economics,88(1), 1–16.

    Google Scholar 

  • Barrett, S. (1994). Self-enforcing international environmental agreements. Oxford Economic Papers,46, 878–894.

    Google Scholar 

  • Barrett, S. (1997). The strategy of trade sanctions in international environmental agreements. Resource and Energy Economics,19(4), 345–361.

    Google Scholar 

  • Barrett, S. (2001). International cooperation for sale. European Economic Review,45(10), 1835–1850.

    Google Scholar 

  • Barrett, S. (2002). Consensus treaties. Journal of Institutional and Theoretical Economics,158(4), 529–547.

    Google Scholar 

  • Barrett, S. (2005). The theory of international environmental agreements. In K. G. Mäler & J. R. Vincent (Eds.), Handbook of environmental economics (Vol. 3, pp. 1457–1516). London: Elsevier.

    Google Scholar 

  • Bergstrand, J. H., Egger, P. H., & Larch, M. (2016). Economic determinants of the timing of preferential trade agreement formations and enlargements. Economic Inquiry,54(1), 315–341.

    Google Scholar 

  • Bernauer, T., Kalbhenn, A., Koubi, V., & Spilker, G. (2010). A comparison of international and domestic sources of global governance dynamics. British Journal of Political Science,40(3), 509–538.

    Google Scholar 

  • Beron, K. J., Murdoch, J. C., & Vijverberg, Wim P. M. (2003). Why cooperate? Public good, economic power, and the Montreal protocol. The Review of Economics and Statistics,85(2), 286–297.

    Google Scholar 

  • Carraro, C., & Siniscalco, D. (1993). Strategies for the international protection of the environment. Journal of Public Economics,52(3), 309–328.

    Google Scholar 

  • Carraro, C., & Siniscalco, D. (1998). International institutions and environmental policy: International environmental agreements: Incentives and political economy. European Economic Review,42(3–5), 561–572.

    Google Scholar 

  • Chen, M., & Joshi, S. (2010). Third-country effects on the formation of free trade agreements. Journal of International Economics,82(2), 238–248.

    Google Scholar 

  • Chen, C., & Zeckhauser, R. (2018). Collective action in an asymmetric world. Journal of Public Economics,158(C), 103–112.

    Google Scholar 

  • Davies, R. B., & Naughton, H. T. (2014). Cooperation in environmental policy: A spatial approach. International Tax and Public Finance,21(5), 923–954.

    Google Scholar 

  • Egger, P. H., Jessberger, C., & Larch, M. (2011). Trade and investment liberalization as determinants of multilateral environmental agreement membership. International Tax and Public Finance,18(6), 605–633.

    Google Scholar 

  • Egger, P. H., Jessberger, C., & Larch, M. (2013). Impacts of trade and the environment on clustered multilateral environmental agreements. The World Economy,36(3), 331–348.

    Google Scholar 

  • Egger, P. H., & Larch, M. (2008). Interdependent preferential trade agreement memberships: An empirical analysis. Journal of International Economics,76(2), 384–399.

    Google Scholar 

  • Eichner, T., & Pethig, R. (2013). Self-enforcing environmental agreements and international trade. Journal of Public Economics,102(1), 37–50.

    Google Scholar 

  • Eichner, T., & Pethig, R. (2015). Is trade liberalization conducive to the formation of climate conditions? International Tax and Public Finance,22(6), 932–955.

    Google Scholar 

  • Eichner, T., & Pethig, R. (2018). Global environmental agreements and international trade: Asymmetry of countries matters. Strategic Behavior and the Environment,7(3–4), 281–316.

    Google Scholar 

  • Finus, M. (2008). Game theoretic research on the design of international environmental agreements: Insights, critical remarks, and future challenges. International Review of Environmental and Resource Economics,2, 29–67.

    Google Scholar 

  • Finus, M., & Al Khourdajie, A. (2018). Strategic environmental policy, international trade and self-enforcing agreements: The role of consumers’ taste for variety. Strategic Behavior and the Environment,7(3–4), 317–350.

    Google Scholar 

  • Finus, M., Altamirano-Cabrera, J.-C., & Van Ierland, E. C. (2005). The effect of membership rules and voting schemes on the success of international climate agreements. Public Choice,125(1–2), 95–127.

    Google Scholar 

  • Fredriksson, P. G., & Gaston, N. (2000). Ratification of the 1992 climate change convention: What determines legislative delay? Public Choice,104(3–4), 345–368.

    Google Scholar 

  • Gelves, A., & McGinty, M. (2016). International environmental agreements with consistent conjectures. Journal of Environmental Economics and Management,78(C), 67–84.

    Google Scholar 

  • Hoel, M. (1992). International environment conventions: The case of uniform reductions of emissions. Environmental and Resource Economics,2(2), 141–159.

    Google Scholar 

  • Hoel, M., & Schneider, K. (1997). Incentives to participate in an international environmental agreement. Environmental and Resource Economics,9(2), 153–170.

    Google Scholar 

  • Hovi, J., Ward, H., & Grundig, F. (2015). Hope or despair? Formal models of climate cooperation. Environmental and Resource Economics,62(4), 665–688.

    Google Scholar 

  • Kuhn, T., Pestow, R., & Zenker, A. (2019). Building climate coalitions on preferential free trade agreements. Environmental and Resource Economics,74(2), 539–569.

    Google Scholar 

  • Libecap, G. D. (2014). Addressing global environmental externalities: Transaction costs considerations. Journal of Economic Literature,52(2), 424–479.

    Google Scholar 

  • Limão, N. (2005). Trade policy, cross-border externalities and lobbies: Do linked agreements enforce more cooperative outcomes? Journal of International Economics, 67(1), 175–199.

    Google Scholar 

  • Mason, C. F., Polasky, S., & Tarui, M. (2017). Cooperation on climate-change mitigation. European Economic Review,99, 43–55.

    Google Scholar 

  • Millimet, D. L., & Roy, J. (2015). Multilateral environmental agreements and the WTO. Economics Letters,134, 20–23.

    Google Scholar 

  • Mitchell, R. B. (2002–2015). International environmental agreements database project. http://iea.uoregon.edu/.

  • Mitchell, R. B. (2003). International environmental agreements: A survey of their features, formation, and effects. Annual Review of Environment and Resources,28, 429–461.

    Google Scholar 

  • Murdoch, J. C., Sandler, T., & Vijverberg, Wim P. M. (2003). The participation decision versus the level of participation in an environmental treaty: A spatial probit analysis. Journal of Public Economics,87(2), 337–362.

    Google Scholar 

  • Neumayer, E. (2002). Does trade openness promote multilateral environmental cooperation? The World Economy,25(6), 815–832.

    Google Scholar 

  • Nordhaus, W. (2015). Climate clubs: Overcoming freeriding in international climate policy. American Economic Review,105(4), 1339–1370.

    Google Scholar 

  • Rubio, S. J., & Ulph, A. (2007). An infinite-horizon model of dynamic membership of international environmental agreements. Journal of Environmental Economics and Management,54(3), 296–310.

    Google Scholar 

  • Sandler, T. (1997). Global challenges: An approach to environmental, political, and economic problems. Cambridge: Cambridge University Press.

    Google Scholar 

  • Sandler, T. (2017). Environmental cooperation: Contrasting international environmental agreements. Oxford Economic Papers,69(2), 345–364.

    Google Scholar 

  • Silva, E. C. D. (2017). Self-enforcing agreements under unequal nationally determined contributions. International Tax and Public Finance,24(4), 705–729.

    Google Scholar 

Download references

Acknowledgements

We are grateful to Ron Davies, the editor of this journal, two anonymous referees, Juan Moreno-Cruz, Dan Matisoff, and seminar participants at Appalachian State University and Hunan University for valuable comments and suggestions.

Author information

Authors and Affiliations

  1. School of Economics, Georgia Institute of Technology, 221 Bobby Dodd Way, Atlanta, GA, 30332-0615, USA

    Tibor Besedeš

  2. Carthage College, 2001 Alford Park Drive, Kenosha, WI, 53140, USA

    Erik P. Johnson

  3. Center for Economics, Finance and Management Studies, Hunan University, 109 Shijiachong Road, Changsha, 410006, Hunan, China

    Xinping Tian

Authors
  1. Tibor Besedeš
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Erik P. Johnson
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Xinping Tian
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Xinping Tian.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Besedeš, T., Johnson, E.P. & Tian, X. Economic determinants of multilateral environmental agreements. Int Tax Public Finance 27, 832–864 (2020). https://doi.org/10.1007/s10797-019-09588-z

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10797-019-09588-z

Keywords

JEL Classification

Search

Navigation