Santiago J. Rubio

Can International Environmental Cooperation Be Bought

In this paper a two-stage game of international environmental agreement formation with asymmetric countries is analytically solved. The equilibrium of the game makes it possible to determine the size and composition of a stable agreement. Two cases are studied. In the first case, countries differ only in abatement costs, while in the second case, they differ in environmental damages. In both cases, two different institutional settings, one without transfers and another with transfers, are considered. The results establish that the asymmetry assumption has no important effects on the scope of cooperation in comparison with the symmetric case if transfers are not used or abatement costs represent the only difference among countries. However, when the only difference is in environmental damages, the level of cooperation that can be bought through a self-financed transfer scheme increases with the degree of asymmetry.

Strategic pigouvian taxation, stock externalities and polluting non-renewable resources

This paper extends Wirl and Dockner?s (1995) model designed to analyze the long-term bilateral interdependence between a resource exporting cartel and a coalition of resource importing country governments. Firstly, depletion effects are introduced into the analysis of the intertemporal properties of a pigouvian tax. Secondly, the feedback Stackelberg equilibria are computed. The results show that the dynamics of the tax depends critically on the level of the marginal environmental damage. Moreover, they also show that the tax defined by the Markov-perfect Nash equilibrium is a neutral pigouvian tax in the sense that it only corrects the market inefficiency caused by the stock externality. However, for the feedback Stackelberg equilibrium the tax is advantageous for the importing countries since the strategic pigouvian taxation reduces the market power of the cartel. Este trabajo propone una extension del modelo de Wirl y Dockner (1995) disenado para analizar lainterdependencia bilateral a largo plazo entre un cartel exportador de un recurso y una coalicion depaises importadores. En primer lugar, se incorporan los efectos agotamiento al analisis de laspropiedades intertemporales de un impuesto pigouviano. En segundo lugar, se calculan los equilibriosfeedback de Stackelberg. Los resultados muestran que la dinamica del impuesto dependecriticamente del nivel del dano medioambiental marginal. Ademas, tambien demuestran que elimpuesto definido por el equilibrio de Nash perfecto de Markov es un impuesto pigouviano neutral en elsentido que solo corrige la ineficiencia causada por la externalidad del stock. Sin embargo, para elequilibrio feedback de Stackelberg el impuesto es ventajoso para los paises importadores ya que laimposicion pigouviana estrategica reduce el poder de mercado del cartel.

Competitive versus efficient extraction of a common property resource: The groundwater case

Abstract In this paper socially optimal and private extraction of a common property aquifer are compared. Open-loop equilibrium and feedback equilibrium in linear strategies have been computed to characterize private extraction. The use of these two equilibrium concepts allows us to distinguish between cost and strategic externalities as long as the open-loop solution captures only the cost externality, and the feedback solution captures both. The results show that strategic behaviour increases the overexploitation of the aquifer compared to the open-loop solution. However, if the groundwater storage capacity is large, the difference between the socially optimal and private extraction, the latter characterized by a feedback equilibrium, is negligible.

A note on cooperative versus non-cooperative strategies in international pollution control

Abstract In this note, we evaluate the scope of Dockner and Long’s [Journal of Environment Economics and Management 24 (1993) 13] conclusion on the efficiency of the non-cooperative outcome in a differential game of international pollution control. We also complete the study of the different equilibria the differential game can present. Our results show that their conclusion requires that the initial value of the stock of pollution be higher than the Pareto-efficient pollution stock so that the equilibrium path of emissions involves a decreasing stock of pollution. Our results also show that the application of the procedure proposed by Tsutsui and Mino [Journal of Economic Theory 52 (1990) 136] to construct a Markov-perfect equilibrium using non-linear strategies is problematic when the initial pollution stock is lower than the Pareto-efficient pollution stock.

Strategic Behavior and Efficiency in the Common Property Extraction of Groundwater

Externalities that arise from privateexploitation of groundwater are analyzed by comparing socially optimal and privateextraction. Open-loop Nashequilibrium and stationary Markov feedbackequilibrium in nonlinear strategieshave been computed to characterize privateextraction. The use of thesetwo equilibrium concepts allows us todistinguish between cost andstrategic externalities as long as the open-loop solutioncaptures only the cost externality, and the feedback solution capturesboth. The results show thatstrategic behavior increases theoverexploitation of the aquifer. However, ifthe groundwater storage capacity is large, thedifference between the sociallyoptimal and private extraction is negligible.

Dynamic Models of International Environmental Agreements: A Differential Game Approach

This article provides a survey of dynamic models of international environmental agreements (IEAs). The focus is on environmental problems that are caused by a stock pollutant as are the cases of the acid rain and climate change. For this reason, the survey only reviews the literature that utilizes dynamic state-space games to analyze the formation of international agreements to control pollution. The survey considers both the cooperative approach and the noncooperative approach. In the case of the latter, the survey distinguishes between the models that assume binding agreements and those that assume the contrary. An evaluation of the state of the art is presented in the conclusions along with suggestions for future research.

On the Coincidence of the Feedback Nash and Stackelberg Equilibria in Economic Applications of Differential Games

In this paper the scope of the applicability of the Stackelberg equilibrium concept in differential games is investigated. Firstly, it is showed that for a class of differential games with state-interdependence the stationary feedback Nash equilibrium coincides with the stationary feedback Stackelberg equilibrium independently of the player being the leader of the game. Secondly, sufficient conditions for obtaining the coincidence between the two equilibria are defined. A review of different economic models shows that this coincidence is going to occur for a good number of economic applications of differential games. This result appears because of the continuous-time setting in which differential games are defined. In this setting the first movement advantage of the leader may disappears and then both equilibria coincide.

Sharing R&D investments in cleaner technologies to mitigate climate change

This paper examines international cooperation on technological development as an alternative to international cooperation on GHG emission reductions. It is assumed that when countries cooperate they coordinate their investments so as to minimize the agreement costs of controlling emissions and that they also pool their R&D efforts so as to fully internalize the spillover effects of their investments in R&D. In order to analyze the scope of cooperation, an agreement formation game is solved in three stages. First, countries decide whether or not to sign the agreement. Then, in the second stage, signatories (playing together) and non-signatories (playing individually) select their investment in R&D. Finally, in the third stage, each country decides its level of emissions non-cooperatively. For linear environmental damages and quadratic investment costs, our findings show that the maximum participation in a R&D agreement consists of six countries and that participation decreases as the coalition information exchange decreases until a minimum participation consisting of three countries is reached. We also find that the grand coalition is stable if the countries sign an international research joint venture but in this case the effectiveness of the agreement is very low.

Can the International Environmental Cooperation Be Bought

In this paper a two-stage game of international environmental agreement formation with asymmetric countries is solved. The equilibrium of the game allows to determine the number of countries interested in signing the agreement. Two cases are studied. In the first case, it is assumed that the only difference among countries is given by the abatement costs, and in the second case, by the environmental damages. In both cases, two different institutional settings, one without side payments and another with side payments, are considered. The results establish that the asymmetry assumption has no important effects on the scope of cooperation in comparison with the symmetric case if side payments are not used or the only difference among countries is given by the abatement costs. When the only difference are the environmental damages, the result is that the level of cooperation that can be bought through a self-financed side payment system increases with the degree of asymmetry.

Optimal growth and land preservation

A model of optimal economic growth with a constant population subject to a constraint on the availability of land is presented. It takes account of the dual character of land as a production factor and as a consumption good (environmental amenities) by determining the optimal intertemporal allocation of land between productive and recreational uses. An extension of the analysis for the case of a growing population with endogenous growth based on human capital accumulation shows that if the rate of discount is not very low then there exists a set of balanced growth paths compatible with a constant allocation of land. En este trabajo se presenta un modelo de crecimiento economico optimo con una poblacion constante sujeto a una restriccion sobre la disponibilidad de tierra. En el modelo se tiene en cuenta el caracter dual de la tierra como factor productivo y como bien de consumo para usos recreacionales y se determina cual es la asignacion intertemporal optima de la tierra entre estos dos usos. En la segunda parte del trabajo, se presenta una extension del analisis para el caso de una poblacion creciente con crecimiento endogeno basado en la acumulacion de capital humano y se demuestra que si la tasa de descuento no es muy pequena existe un conjunto de sendas de crecimiento equilibrado compatibles con una asignacion constante de la tierra.