An Empirical Assessment of Measures to Enhance the Success of Global Climate

We analyze important forces that hamper the formation of successful self-enforcing agreements to mitigate global warming. The analysis combines two modules: a) a computable general equilibrium model that captures the feedback between the economy, environmental damages and the climate system and b) a game theoretic model that determines stable coalitions in the presence of free-riding incentives. We consider two types of measures to enhance the success of international environmental treaty-making: a) transfers, aiming at balancing asymmetric gains from cooperation; b) institutional changes, aiming at making it more difficult to upset stability of a treaty. We find that institutional changes may be as important as transfers and should therefore receive more attention in future international negotiations. JEL-Classification: C68, C72, H41, Q25