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An Economic Analysis of International Environmental Cooperation

Author: KongYuan
Tutor: ZhongMaoChu
School: Nankai University
Course: Industrial Economics
Keywords: International Environmental Agreement IAM Environmentalefficiency Probability of Ratification
CLC: X196
Type: PhD thesis
Year: 2012
Downloads: 72
Quote: 0
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It’s a common principle to protect the environment and curb the deterioration ofthe environment but it is very difficult to reach the target. We should give a propersolution to the increasingly serious and urgent problems such as global warming,terrorism, poverty. These issues have some distinguishing characteristics, so theycannot be resolved by tax or the Coase theorem, except by voluntary internationalmultilateral cooperation agreement. Montreal Protocol and the Kyoto Protocol arethe reprehensive multilateral environmental agreements. The former achieved agood reduction effect, while the latter have large scale, but there isn’t a bindingarticle.It’s very difficult to achieve an international environmental agreement,especially on the carbon abatement cooperation. There are two reasons for thispuzzle, first, the supply of international public goods is inefficiency for sort ofcentral power; second, the influence of carbon emission is uncertain, this uncertaintyalso makes it possible for some nations to have strong excuse of carbon reduction isunnecessary. To solve the above problem, this paper mainly studies the following:First, for international public goods property of the carbon emission, inaccordance with the general consensus of academics, the theoretical solution is theinternational environmental agreement (IEA). Chapter II establishes a staticsymmetry IEA model to get the IEA’s basic conclusion, the scale and effects ofcooperation subject to the three core elements: the marginal revenue, marginal cost,and the form of game. Using carbon emissions as an example, the higher themarginal emission revenue, the less marginal emission cost (pollution cost), therewill be more equilibrium carbon emissions. At the same time, cournot game hassmaller cooperation scale than the leader game, for a leader with first-moveradvantage in the game.Second, we relax the homogeneous state assumption. Given the equilibriumsolution is difficult to interpret under the heterogeneity conditions; this article uses the simulation form. Different with RICE and other models, we endogenous thecarbon&sulfur emissions using the energy as the medium, this emission processcontains multiple public goods properties and is more conform to reality thanexogenous assumption.The simulation results showed that the spillover effect of the interactionbetween carbon emissions and sulfur emissions, to a certain extent, will increase acountry’s carbon reduction motivation, but due to the sulfur terminal abatement costsis much lower than the source reduction (e.g. improving energy efficiency and usealternative clean energy), so the spillover effects will be reflected only in thelong-term. We further simulated the impact of the scale of cooperation on a country’swelfare. China, for example, due to the short-term marginal abatement costs is muchlower than other countries therefore undertaken an excessive amount of emissionsreductions responsibility, in other words, it’s bad idea for china to cooperation withany State. This is the reason for using “common but differentiated responsibilities”in international environmental cooperation.Third, given the IA model uses an exogenous assumption in the two basicelements: the source of environmental technologies, as well as non-direct economicfactors in international environmental cooperation. It is extremely difficult toendogenous these elements in the IA model, so we couldn’t give deep-level policyrecommendations. To solve these problems we give a separate study of the two keyvariables in Chapters IV and V.Chapter IV measures the environmental efficiency of Chinese29provincesbetween2001and2008, using input-oriented DEA and output-oriented DDF method.We analyze the environmental efficiency spillover effect under the trade andneighbor linkage. The two channels are different, under the former, environmentalefficiency spillover effects is positive, while the latter is negative. The regions withlower industrial capital intensity, lower proportion of industry in the nationaleconomy and higher R&D density tend to have higher environmental efficiency, butthe R&D absorptive capacity has no consistent effect on the environmentalefficiency. The results remind us that we need to further optimize the inter-industrystructure and intra-industry structure, and more R&D should concern on the ecological environment.The chapter IV studies the factors which influence signature of the IEA. Usingthe Montreal Protocol as an example. Montreal Protocol is widely considered as themost successful environment protection agreement. It’s believed that the ratificationof the protocol is not only influenced by environmental factors, but also economicand political factors. The authors use a SEM framework to investigate the impact ofvarious country characteristics on the duration of time taken to ratify the protocol.The most significant finding is that the legislative delay is negatively related to thestrategic interests. The latter finding is consistent with earlier research that founddemocratic freedoms, state importance and openness will reduce the delay ofratification.

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