Stabilizing International Environmental Agreements

This chapter models international environmental agreements (IEAs)International Environment Agreements (IEAs) to solve transboundary pollutionTransboundary pollution issues under a game theoretic framework and examines the rules necessary to realize large, stable IEAsStable IEA. After briefly introducing the concept of game theory, we show that transboundary pollutionTransboundary pollution is an example of the well-known prisoner’s dilemmaPrisoner’s dilemma. Next, we consider IEAsInternational Environment Agreements (IEAs) using games with symmetric and asymmetric countries. The results show that IEAInternational Energy Agency (IEA) itself does not work automatically, that is, it is not sufficient to simply ask for countries’ voluntary participations for an efficient agreement to be stable. Finally, we examine the effects of transfer schemesTransfer schemes from so-called supportersSupporters as an additional rule. Supporters are the countries that do not abate pollutants themselves but commit to pay transfers to countries who will sign the IEAInternational Energy Agency (IEA). Using a framework of coalition formation game, we show that the supporter scheme is effective in promoting cooperative behaviors of the countries and expanding the size of stable IEAs for both symmetric and asymmetric countries. This analysis contributes to our understanding of the effectiveness of the transfer schemesTransfer schemes among asymmetric countries since there are few studies which theoretically examine these matters.