Two Regional Agreements Between Developed and Developing Countries: The Choice of Two Strategies

Abstract

This paper aims at increasing the choice of regional agreements where developed and developing countries participate, by considering two strategies. We present a new strategy based on that of Asheim et al. (2006, Journal of Environmental Economics and Management, vol.51, pp.93-109), designating the countries that are permitted to punish non-compliance, to sustain the agreement. If a country deviates from the strategy, the same type of countries as the deviator will take cooperative action (reduce emissions), whereas the other type of countries, which are different from the deviator, will take punishment action (not reduce emissions). Unlike previous studies, this study focuses on the feasibility of IEAs rather than the number of signatories. We adopt two strategies and compares the condition for a weakly renegotiation-proof equilibrium between them. A main finding is that on the negotiation table before agreements start, the negotiating countries have several choices regarding the number of signatories by considering two strategies. The results would be significant for the future success of a treaty for climate change in terms of IEA feasibility.