This paper studies the formation of self-enforcing global environmental agreements in a world economy with international trade and two groups of countries that differ with respect to fuel demand and environmental damage. It investigates whether the signatories’ threat to embargo (potential)...

In the basic model of international environmental agreements (IEAs) (Barrett 1994, Rubio and Ulph 2006) extended by international trade, self-enforcing - or stable - IEAs may comprise up to 60% of all countries (Eichner and Pethig 2013). But these IEAs reduce total emissions only slightly...

A small open economy produces a consumer good, green and black energy, and imports fossil fuel at an uncertain price. Unregulated competitive markets are shown to be inefficient. The implied market failures are due to the agents' attitudes toward risk, to risk shifting and the uniform price for...

We study the introduction of new technologies when their costs are subject to idiosyncratic uncertainty and can only be fully learned through individual experience. We set up a dynamic model of clean experience goods that replace old polluting consumption options and show how optimal regulation...

A well-known result about market power in emission permit markets is that efficiency can be achieved by full free allocation to the dominant firm. I show that this result breaks down when taking the interaction between input and output markets into account, even if the firm perceives market...

We consider a world economy, in which the global public good ’biodiversity’ is positively correlated with that share of land which is protected by land-use restrictions against the deterioration of habitats and ecosystems. The willingness-to-pay for biodiversity conservation is positive in...

We study adaptation to climate change in a federalist setting. To protect themselves against an increase in flood risk, regional governments choose among adaptation measures that vary with respect to their costs, the level of protection they offer, and the presence and nature of spillovers to...

Scientific expertise suggests that mitigating extreme world-wide climate change damages requires avoiding increases in the world mean temperature exceeding 2° Celsius. To achieve the two degree target, the cumulated global emissions must not exceed some limit, the so-called global carbon...

We analyze international environmental agreements in a two-stage game when governments have homo moralis preferences à la Alger and Weibull (2013, 2016). The countries base their decisions on the material payoff obtained on the hypothesis that all other countries act as they with predetermined...

Because of a link between the EU ETS and the Kyoto Flexible Mechanisms, the emission certificates traded on these markets are in principle interchangeable assets; despite of this, a persistent price difference exists. We explain this price spread using a theoretical model that combines three...