Do Abatement Quotas Lead to More Successful Climate Coalitions? by

This paper studies the effect of different agreement designs on the stability and success of international agreements (IEAs). Four agreement designs are tested that differ in the level of total abatement and the allocation of abatement duties among coalition members. Apart from the standard assumption in the literature of an optimal and efficient abatement scheme, which we call “Reference Design”, three designs of a uniform emission reduction quota, which we call “Joint Quota”, “Median Quota Proposal” and “Lowest Quota Proposal”, are considered. Additionally, we analyze the possibility that quotas can be traded among signatories. The analysis is conducted with the empirical STAbility of COalitions (STACO) model that captures the impacts of the climate change problem on abatement costs and damage costs of 12 regions. Our findings show that uniform quotas help to improve upon the success of IEAs in the presence of free-rider incentives. The median and lowest quota agreement designs are particularly successful with and without trade. Our results provide a rationale for the frequent application of uniform emission reduction quotas in past IEAs. JEL-Classification: C72, D72, D78, H41, Q25