Simulating coalitionally stable burden sharing agreements for the climate change problem

The CLIMNEG world simulation (CWS) model is introduced here for simulating cooperative game theoretic aspects of global climate negotiations. The CWS model is derived from the seminal RICE model by Nordhaus and Yang [Am. Econ. Rev. 86 (1996) 741]. We first state the necessary conditions that determine Pareto efficient investment and emission abatement paths under alternative regimes of cooperation between the regions. We then show with a numerical version of the CWS model that the transfer scheme advocated by Germain et al. [M. Germain, P.L. Toint, H. Tulkens, Financial transfers to ensure international optimality in stock pollutant abatement, in: F. Duchin, S. Faucheux, J. Gaudy, I. Nicolaı̈ (Eds.), Sustainability and Firms: Technological Change and Changing Regulatory Environment, Edward Elgar, Celtenham, UK, 1997] induces an allocation in the (“gamma”) core of the world carbon emission abatement cooperative game.