The Consequences of Unilateral Withdrawals from the Paris Agreement
CESifo, Munich, 2019
CESifo Working Paper No. 7804
International cooperation is at the core of multilateral climate policy. How is its effectiveness harmed by individual countries dropping out of the global mitigation effort? We develop a multi-sector structural trade model with emissions from production and a constant elasticity of fossil fuel supply function to simulate the consequences of unilateral withdrawals from the Paris Agreement. Taking into account both direct and leakage effects, we find that a US withdrawal would eliminate more than a third of the world emissions reduction (31.8% direct effect and 6.4% leakage effect), while a potential Chinese withdrawal lowers the world emission reduction by 24.1% (11.9% direct effect and 12.2% leakage effect). The substantial leakage is primarily driven by technique effects induced by falling international fossil fuel prices.
Energy and Climate Economics
Empirical and Theoretical Methods