Fourth, I also include uncertainties about the extent of future damages from climate change. Similar to technological uncertainty, the original model does not allow countries to incorporate this lack of knowledge in their decision making.
Fifth, I modify the original model to study the stability of cooperation in non-global groups. The slow progress of negotiations under the UNFCCC has inspired the idea of negotiations in other fora, so-called climate clubs. Fre-quently mentioned as potential climate clubs are the Group of Twenty (G20) and the Major Economies Forum On Energy And Climate (MEF) (Hjerpe and Nasiritousi, 2015). The decision making in such groups is similar to the UNFCCC, as decisions are made by consensus of all members. Therefore, the core stability concept is a natural candidate for the analysis of stability of climate cooperation in such clubs. However, the model of core stability has so far only been used to study global cooperation.
1.3 Approach
Chapter 2 starts by giving an overview of the original model of core stability and of other stability concepts. The chapter further discusses the literature for all concepts and compares assumptions and results.
For the inclusion of international economic effects in Chapter 3, the con-sumption function in the original model of core stability is extended to in-corporate consequences of emission mitigation in multiple countries. To as-sess the effects on stability of global cooperation, a numerical model of the extended setup is implemented, which allows for the calculation of the emis-sion level and utility of each country for each possible coalition of countries.
The model is applied using consumption functions from a computable gen-eral equilibrium (CGE) model and damage functions from the literature. The calculation is performed for three scenarios, depicting a range of possible damages from climate change. The chapter also discusses policy implica-tions of the results.
In Chapter 4, the numerical model is used to determine the influence of future pathways for key low-carbon technologies, namely wind energy, solar pho-tovoltaic, and carbon capture and storage. To this end, the model is applied to two additional sets of consumption functions from the CGE model, repre-senting an optimistic and a pessimistic outlook on the development of these technologies. In addition, the incentives of key countries are analysed using detailed economic outputs from the CGE model. The additional consump-tion funcconsump-tions are again combined with three scenarios for climate damages, resulting in a total of nine specifications.
Chapter 5 considers the effect of uncertainty on the decision making of coun-tries, and the subsequent impact on the stability of climate cooperation. The analysis in this chapter is based on the original theoretical setup without in-ternational economic effects, so as to avoid overlapping effects. The setup is extended, using concepts from the game-theoretical literature, to include uncertain utility and payoffs, as well as individual risk preferences for each country. This basic model is applied to both technological uncertainty and uncertainty in climate damages, as well as to two different concepts of an un-certain allocation present in the game-theoretical literature. For each specifi-cation, either an example of a game in which global cooperation is unstable is presented, or it is shown that global cooperation is stable for all parameters.
Finally, in Chapter 6 the original model of global cooperation is adapted to study the stability of cooperation in climate clubs. First, it is assumed that countries in a club are symmetric and the influence of key parameters on stability is analysed. Afterwards, the assumption of symmetry is dropped and the impact of heterogeneity is studied. Further, mitigation cost and climate damage parameters are estimated for the case of the G20, allowing for an assessment of its potential as a climate club.
Each chapter also provides a short literature overview on the corresponding topic and compares the results with relevant analyses from other stability concepts. The thesis concludes in Chapter 7, which also provides overar-ching conclusions and implications drawn from the results of the analyses,
1.3 Approach
as well as a critical reflection of the applied methods and an outlook for further research.
Chapters 3 to 6 are based on four papers, which have been slightly edited for consistency and coherence in this thesis. Table 1.1 shows the authors, title and reference for each paper.
6 Jan Kersting Cooperation of
climate clubs
Kersting (2015)
Table 1.1: Overview of the papers prepared for this thesis.
2 Models of international climate cooperation
This chapter first describes the game-theoretical model of international cli-mate negotiations based on core stability by Chander and Tulkens (1995, 1997), hereafter CT model. The model provides the basis for the analyses in this thesis. As the model is rooted in cooperative game theory, a brief introduction into the topic and its relevant concepts is given, followed by the specific setup of the CT model. Further, this chapter describes other stabil-ity concepts present in the literature and their results. Finally, the different concepts are compared and their applicability to the UNFCCC negotiations is discussed.