This paper presents a stylized international environmental agreements game with two regions differing in their preference for environmental quality. If side payments are allowed, cooperation can increase the payoffs accruing to both regions. However, cooperation can be impeded by asymmetric...

This paper presents a model of international environmental agreements in which cooperation between asymmetric countries can arise through pure self-interest. It demonstrates how emissions trading creates economic surplus by exploiting asymmetries. This surplus can be distributed via the...