STACO research project

STACO (Stability of Coalitions ): A research project on the formation and stability of international climate agreements

The STACO project investigates the formation and stability of international climate agreements. The basic structure of the STACO models consists of interacting regions that (i) choose to join an international climate agreement or not; and (ii) choose their optimal climate policy given the coalition formed. The regions are characterised by their abatement costs and damage cost functions and linked via global climate change and the possibility to establish an international agreement.

The STACO project has first been initiated in 2002 by Prof. E.C. van Ierland, Wageningen University, the Netherlands, and Dr. M. Finus, now at the University of Exeter, UK. The project is maintained by the Environmental Economics and Natural Resources Group of Wageningen University.

For general information on the STACO project, contact Ekko van Ierland or Hans-Peter Weikard.

Last updated 26 February 2012 by H.-P. Weikard.

History

Inspired by the constitution of the Kyoto-protocol a group of researchers in (environmental) economics, game theory and operations research got together to discuss how to analyse economic incentives for nations to co-operate in the abatement of greenhouse gasses. From the perspective of the different disciplines, several questions appeared:

• What are the reelvant game theory models on coalition formation?
• How can costs and benefits of emission reduction be estimated for different coalitions?
• Which algorithms can be applied to compute economic equilibria?

Based on this background, the project investigates several topics: stability of climate coalitions in a cartel formation game, exclusive membership, multiple coalition games, transfer schemes, quota, the stability likelihood of coalitions under uncertainty, technological change and sequential games. Several topics are outlined below.

Research topics

Formation and stability of cartels for international climate agreements
The question is whether from an economic perspective the formation of one cartel coalition for the 12 world regions in the case is viable and stable. A detailed description of the initial model calibration is given in [W1]; first results can be found in [2] and [4]. A calibration with more recent empirical estimates is provided in [W2] and [14] where also optimal time paths of abatement and dynamic transfer schemes are investigated. Micheal Finus presents a recent overview and reflections in [12].

Mechanisms to increase the stability of coalitions
The mechanisms mainly include restrictions to the accession of new members (see [2]), transfers within a coalition according to different sharing rules (see [5], [6], [13] and [14]), and allocation of abatement quotas ([11]). The related issue of lobbying is addressed in [W2]. The role of minimum participation rules is explored in [W3].

Multiple coalition formation
The question is whether several coalitions may exist at the same time. Mainly the complexity of computations increases and the influence of choice rules. A first summary of results is given in [7] and [9].

Likelihood and learning: stability of coalitions under uncertainty
The main question is how stable a coalition might be given the uncertainty of the data used. One way to look at it is to try to estimate the likelihood of this event. An approach has been sketched in [1]; in [10] and [W2] this approach is applied and used to investigate the effect of learning on the stability of coalitions.

Sequential games of coalition formation
In practice the development of a coalition is a process in time where new members may enter a coalition and old members may leave. The study of this process requires a sequential approach which is described and applied in [15] and [18].

Trade-offs between adaptation and mitigation and the stability of international climate agreements
A PhD position is financed by NWO under the Vulnerability, Adaptation and Mitigation program. The aim of the project is to investigate the influence of adaptation strategies on the formation and stability of International Climate Agreements (ICAs). Furthermore, the project analyses possibilities to improve the stability of coalitions via compensating payments and/or issue-linking.See also the ongoing PhD project by Kelly de Bruin and [WP4].

Technological change, spillovers and the incentives for coalition formation
Technological change alters the abatement costs of regions, and thereby the incentives of regions to cooperate in an international climate agreement.  Furthermore, coalition members may cooperate not only on mitigation of carbon emissions, but also on development and diffusion of cleaner technologies, either through technology spillovers or through technology agreements. The study of these processes is investigated in the PhD thsis of Miyuki Nagashima. See [8] and [17] for recent papers.

Collaborators

• Juan-Carlos Altamirano-Cabrera, EPFL, Lausanne, Switzerland 
• Kelly de Bruin, Environmental Economics, Umeå University, Sweden 
• Rob Dellink, Environmental Economics and Natural Resources Group, Wageningen University and OECD, Paris, France
• Eligius Hendrix, Operations Research, Wageningen University
• Ekko van Ierland, Environmental Economics and Natural Resources Group, Wageningen University
• Miyuki Nagashima, Research Institute of Innovative Technology for the Earth, Kyoto, Japan 
• Hans-Peter Weikard, Environmental Economics and Natural Resources Group, Wageningen University

PhDs completed   

• Miyuki Nagashima, Research Institute of Innovative Technology for the Earth, Kyoto, Japan (PhD March 2010) 
• Niels Olieman, Rabo Bank, The Netherlands (PhD March 2008) 
• Elena Saiz-Perez, Nijmegen University (PhD October 2007)
• Juan-Carlos Altamirano-Cabrera, EPFL, Lausanne, Switzerland (PhD February 2007) 

Former members

• Michael Finus, Department of Economics, University of Exeter, UK 

Visiting researchers

• Raúl Castro, Natural and Environmental Resources Economics Group, Universidad Complutense de Madrid (March/April 2010) 
• Leo Wangler, Department of Economics, University of Jena, Germany (February/March 2009)
• Cecile Poulain, Ecole Superieure d'Agriculture d'Angers, Paris, France (2005)
• Pengcheng Liu, Huazhong Agricultural University, China (2005)

Peer reviewed publications

[18] Weikard, H.-P., R.B. Dellink (2012) Sticks and carrots for the design of climate agreements with renegotiations. Annals of Operation Research, forthcoming. (earlier version: Nota di Lavoro 26.2008, FEEM).

[17] Nagashima, M.,  H.-P. Weikard, K.C. de Bruin, and R.B. Dellink (2011) International Climate Agreements under induced technological change. Metroeconomica 62(4), 612-364.

[16] Dellink, R. (2011) Drivers of stability of climate coalitions in the STACO model. Climate Change Economics 2 (2), 105-128.  

[15] Weikard, H.P., R.B. Dellink and E.C. van Ierland (2010) Renegotiations in the Greenhouse. Environmental and Resource Economics 45, 573-596.

[14] Nagashima, M., R.B. Dellink, E.C. van Ierland and H.-P. Weikard (2009) Stability of international climate coalitions - a comparison of transfer schemes. Ecological Economics 68, 1476-1487.

[13] Weikard, H.P. (2009) Cartel stability under an optimal sharing rule. The Manchester School 77 (5), 599-617.  (Preprint: Nota di Lavoro 77.2005, FEEM)

[12] Finus, M. (2008) Game Theoretic Research on the Design of International Environmental Agreements: Insights, Critical Remarks and Future Challenges. International Review of Environmental and Resource Economics 2, 29-67.

[11] Altamirano-Cabrera, J.C., M. Finus and R.B. Dellink (2008) Do abatement quotas lead to more successful climate coalitions? The Manchester School 76, 104-129.

[10] Dellink, R.B., M. Finus and N.J. Olieman (2008) 'The stability likelihood of an international climate agreement. Environmental and Resource Economics 39, 357-377. 

[9] Finus, M., M.E. Sáiz and E.M.T. Hendrix (2008) 'An Empirical Test of New Developments in Coalition Theory for the Design of International Environmental Agreements. Environment and Development Economics 14, 117-137.

[8] Nagashima, M. and R.B. Dellink (2007) Technology spillovers and stability of international climate coalitions', International Environmental Agreements: Politics, Law, and Economics 8, 343-365. (Preprint: Nota di Lavoro 98.2007, FEEM).

[7] Sáiz, M.E., E.M.T. Hendrix and N.J. Olieman (2006) On the computation of stability in multiple coalion formation games. Computational Economics 28, 251-275.

[6] Weikard, H.P., M. Finus and J.C. Altamirano-Cabrera (2006) The Impact of Surplus Sharing on the Stability of International Climate Agreements. Oxford Economic Papers 58, 209-232.

[5] Altamirano-Cabrera, J.C. and M. Finus, M. (2006) Permit Trading and Stability of International Climate Agreements. Journal of Applied Economics 9, 19-48.

[4] Finus, M., E.C. van Ierland and R.B. Dellink (2006) Stability of climate coalitions in a cartel formation game. Economics of Governance 7, 271-291.

[3] Van Ierland, E.C., M. Finus and R.B. Dellink (2005) Environmental economics: how to reach agreement? Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues 40, pp. 27-47.

[2] Finus, M., J.C. Altamirano-Cabrera and E.C. van Ierland (2005) The effect of membership rules and voting schemes on the success of international climate agreements. Public Choice 125, 97-127.

[1] Olieman, N.J. and E.M.T. Hendrix (2004) Stability likelihood of coalitions in a two-stage cartel game: An estimation method. European Journal of Operational Research 174, 333-348.

Working papers

[WP4] de Bruin, K.C., H.-P. Weikard, and R.B. Dellink (2009) The role of proactive adaptation in climate change mitigation. CERE Working Paper 2011:9. Umea University.

[WP3] Weikard, H.-P., L. Wangler, A. Freytag (2009) Minimum Participation Rules with Heterogeneous Countries. Jena Economic Research Papers 2009-77. University of Jena, Germany.

[WP2] Dellink, R. and M. Finus (2009) Uncertainty and Climate Treaties: Does Ignorance Pay? Stirling Economics Discussion Paper 2009-15. University of Stirling, Scotland.

[WP1] Altamirano-Cabrera, J-C., Weikard, H-P., and H. Haffoudhi (2007) Influence of Political Pressure Groups on the Stability of International Climate Agreements. NCCR Climate Working Paper 2007-03, University of Bern-EPFL-Paul Scherrer Institute, Bern.

Technical documents

[T2] Dellink, R., M. Nagashima, E.C. van Ierland, E.M.T. Hendrix, E. Sáiz and H.-P. Weikard (2009) STACO Technical Document 2: Model description and calibratrion of STACO 2.1, mimeo, Wageningen University. [download]

[T1] Dellink, R.B., J.C. Altamirano-Cabrera, M. Finus, E.C. van Ierland, A. Ruijs and H.P.Weikard (2004) Technical Background Paper of the STACO Model (version 1.0) , mimeo, Wageningen University. [download]