Self-Enforcing Climate Coalitions for Farsighted Countries: Integrated Analysis of Heterogeneous Countries

We  study  formation  of  international  climate  coalitions.  Countries  are  farsighted  and  rationally  predict  the  consequences  of  their  membership  decisions  in  climate  negotiations.  Within  the  context of an integrated assessment model of the economy and the climate, we characterise the equilibrium number of coalitions and their number of signatories independent of certain types of heterogeneity,  and  show  that  the  resulting  treaties  are  robust  to  renegotiation.  With  a  richer  structure  of  energies  we  investigate  possible  coalition  outcomes  for  a  calibrated  model.  We  confirm  our  heterogeneity  results  and  in  contrast  to  earlier  approaches  based  on  internal  andexternal stability, much larger coalitions can be sustained in equilibrium.