The present paper examines the size of stable IEAs concerning transboundary environmental problems. A coalition is considered stable when no signatories wish to withdraw while no more countries wish to participate. We assume that the coalition behaves as a leader maximizing its members’ aggregate welfare while the countries outside the coalition maximize their own welfare independently, taking the choice of the coalition as given. We further assume a benefit function that is concave in the country’s own emissions, an environmental damage function that is convex in aggregate net emissions and an abatement cost function that is convex in the country’s abatement effort. Each country chooses both its emission and abatement levels. Within this framework we find that the size of the stable coalition depends on the model’s parameters but it is always larger than in the case in which countries are allowed to choose either emission or abatement level. Our results complement Barrett’s (1994) suggestion that the size of the stable coalition depends on the model’s parameters, even though we are imposing the constraint that the net emission flow is positive.
by Eftichios Sartzetakis & Stefania Strantza