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Carlo Carraro

Università Ca' Foscari Venezia, Environmental Sciences, Faculty Member

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Carlo Carraro is President Emeritus and Professor of Economics at Ca’ Foscari University of Venice. He holds a Ph.D. from Princeton University. He was President of the University of Venice from 2009 to 2014. He is Past-President of the European Association of Environmental and Resource Economists (EAERE) and member of the Bureau of the Intergovernmental Panel on Climate Change (IPCC). He is also Strategic Advisor of the Euro Mediterranean Centre for Climate Change (CMCC), a Fellow of the Association of Environmental and Resource Economists (AERE) and Scientific Director of the Fondazione Nord Est. He si also Chair of the European Institute on the Economics of the Environment and a Research Fellow of CEPR, London, CESifo, Munich and CEPS, Brussels. His blog is www.carlocarraro.org.

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Efrem Castelnuovo

Hertie School

Alessandro LANZA

Georgetown University

Università Ca' Foscari Venezia

Alemaya University

University of California, Santa Barbara

Michele Moretto

Università degli Studi di Padova

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Papers by Carlo Carraro

Front matter, acknowledgments, table of contents

Energy and Climate Change in China

BRILL eBooks, 2013

This paper examines future energy and emissions scenarios in China generated by the Integrated As... more This paper examines future energy and emissions scenarios in China generated by the Integrated Assessment Model WITCH. A Business-as-Usual scenario is compared with five scenarios in which Greenhouse Gases emissions are taxed, at different levels. The elasticity of China's emissions is estimated by pooling observations from all scenarios and compared with the elasticity of emissions in OECD countries. China has a higher elasticity than the OECD for a carbon tax lower than 50$ per ton of CO2-eq. For higher taxes, emissions in OECD economies are more elastic than in China. Our best guess indicates that China would need to introduce a tax equal to about 750$ per ton of CO2-eq in 2050 to achieve the Major Economies Forum goal set for mid-century. In our preferred estimates, the discounted cost of following the 2°C trajectory is equal to 5.4% and to 2.7% of GDP in China and the OECD, respectively.

Behavioral and Distributional Effects of Environmental Policy Introduction

National Bureau of Economic Research, 2000

The views expressed herein are those of the authors and do not necessarily reflect those of the N... more

Editorial: Reconciling Domestic Energy Needs and Global Climate Policy: Challenges and Opportunities for China and India

It is unanimously recognized that emissions from China and India will be responsible for a large ... more It is unanimously recognized that emissions from China and India will be responsible for a large fraction of the incremental growth of Greenhouse Gases (GHGs) in the atmosphere in the next decades (IEA 2010; EIA 2011; Clarke et al. 2009). This explains, at least partly, the reluctance of the United States to take on any binding commitment to reduce GHGs emissions if China and other major developing economies do not make any steps to reduce their own GHGs emissions. At the same time, major developing countries are not willing to make costly efforts to reduce GHG emissions if developed economies do not rapidly commit to drastic emissions reductions. This contraposition has been one of the causes of the lack of substantial progress in international climate change negotiations. The Copenhagen Summit has marked a change. For the first time, all major developing countries have pledged to take steps to control the growth of their GHGs emissions. The ''Copenhagen Pledges'', although informal and insufficient according to some critics (UNEP 2010), have been confirmed at the Cancun climate talks in December 2010 and will very likely characterize the post-Kyoto climate agenda until 2020. This special issue collects a set of articles that take stock of the current status of the negotiations and suggest an unconventional, pragmatic way forward. All the articles recognize that China and India will not enter a textbook-style international climate agreement soon. They are also aware that the future international climate architecture will be fragmented and incomplete at least until 2020 (Carraro and Massetti 2011; Aldy and Stavins 2007). Therefore, the inability to build a large binding agreement with absolute targets is not seen as a tragedy, but rather as a fact that should be considered as a starting point for future steps toward global emission reductions. For this reason, all articles take a long-term perspective. As Zhang notes in his article, the real question when dealing with China and India is post-2020 and not pre-2020.

Article in Press

Journal of Policy Modeling

A Stochastic Multiple Players Multi-Issues Bargaining Model for the Piave River Basin

Social Science Research Network, 2007

The objective of this paper is to investigate the usefulness of non-cooperative bargaining theory... more The objective of this paper is to investigate the usefulness of non-cooperative bargaining theory for the analysis of negotiations on water allocation and management. We explore the impacts of different economic incentives, a stochastic environment and varying individual preferences on players' strategies and equilibrium outcomes through numerical simulations of a multilateral, multiple issues, non-cooperative bargaining model of water allocation in the Piave River Basin, in the North East of Italy. Players negotiate in an alternating-offer manner over the sharing of water resources (quantity and quality). Exogenous uncertainty over the size of the negotiated amount of water is introduced to capture the fact that water availability is not known with certainty to negotiating players. We construct the players' objective function with their direct input. We then test the applicability of our multiple players, multi-issues, stochastic framework to a specific water allocation problem and conduct comparative static analyses to assess sources of bargaining power. Finally, we explore the implications of different attitudes and beliefs over water availability.

Factor-Augmenting Technical Change: An Empirical Assessment

Social Science Research Network, 2009

Starting from a system of factor demands, an empirical model that allows estimating factoraugment... more Starting from a system of factor demands, an empirical model that allows estimating factoraugmenting technical change is derived. Factor-augmenting technical change is defined as the improvement in factor productivities that can occur either exogenously or endogenously, with changes in other macroeconomic variables. This paper provides additional estimates for the substitution possibilities among inputs and it offers new empirical evidence on the direction and sources of factor-augmenting technical change, an issue that has not yet been explored by the empirical literature on growth determinants. The empirical findings suggest that technical change is directed. Technical change tends to be more energy-saving than capital-and labour-saving. Both R&D investments and international trade are important determinants of growth in energy and capital productivity whereas technical change for labour is positively related to education expenditure. Therefore, the sources of factor-augmenting technical change go beyond R&D investments, as proposed in the theory of directed technical change, and they differ across inputs. In other words, not only is technical change directed, the sources of factor-augmenting technical change appear to be input specific.

International Economic Policy Coordination

Springer eBooks, 2005

The use of general descriptive names, registered names, trademarks, etc. in this publication does... more

Endogenous Strategic Issue Linkage in International Negotiations

This assumption enables us to adopt the usual Nash equilibrium concept to identify the equilibriu... more This assumption enables us to adopt the usual Nash equilibrium concept to identify the equilibrium of the coalition game. Different results could be obtained under exclusive membership or coalition unanimity (cf. . Let us introduce a few definitions. Let c u * denote the equilibrium number of players who sign the linked agreement (that is, when issue linkage is chosen in the first stage of the game). Then P u (c u * ) is their equilibrium payoff. The remaining nϪc u * players are the free-riders of the linked agreement. Their equilibrium payoff is Q u (c u * ). If linkage is not adopted, we have two agreements. Let 'a' identify the agreement whose benefits are not excludable (for instance, the environmental agreement), whereas 't' identifies the agreement with (partly) excludable benefits (for example, the agreement on technological cooperation). Then, let c a * be the equilibrium number of players who sign the public good agreement, or 'a-agreement', whereas c t * is the equilibrium number of signatories of the (quasi) club good agreement, or 't-agreement'. P a (c a * ) is the equilibrium payoff of the former, whereas P t (c t * ) is the equilibrium payoff of the latter. Finally, free-riders of the 'a-agreement' obtain a payoff equal to Q a (c a * ), whereas free-riders of the 't-agreement' obtain From (3.3a) it is clear that, if the two separate agreements are profitable, then the linked agreement is also profitable. However, a linked agreement Proposition 1: At the equilibrium, c u * Յc t * , that is, the number of players who participate in the linked agreement is always smaller than or equal to the number of players who participate in the (club good) agreement linked to the public good agreement. The linked agreement is internally stable When c u * Ͼc a * , the left-hand side of (3.7) is positive because there is an incentive to free-ride on the 'a-agreement' for all cϾc a * . This implies that the right-hand side is also positive, that is, P t (c u * )ϾQ t (c u * Ϫ1). Therefore, as far as the 't-agreement' is concerned, there is still an incentive to enter the coalition. Hence, c u * must be smaller than or equal to the equilibrium coalition size c t * , that is, c u * Յc t * . The conclusion shown by Proposition 1 holds both in Case A and in Case B. The only difference is that, in Case A, P t (c)ϪQ t (cϪ1) is non-negative for all c in the interval [2, n] because this is the condition which implies c t * ϭn. Hence, P t (c)ϪQ t (cϪ1) is obviously non-negative also for cϭc u * . Note that Proposition 1 and the preceding analysis lead to the following ordering: c a * Ͻc u * Յc t * and c°t Յc°u . (3.8) The payoff functions of the two separate games and of the linked game are shown in Figures 3.5 and 3.6 for Cases A and B respectively. Both figures deal with the situation in which c u * Ͼc°u. These figures will be useful to clarify the analysis of the equilibrium of the game. We are now ready to determine players' equilibrium choice in the first stage of the game. In Case A, the situation is simpler, because, if players negotiate only on the 't-agreement', at the equilibrium all countries would like to sign it (c t * ϭn). Hence, if players disagree on linkage, either they cooperate on both the 'a-agreement' and the 't-agreement', or they free-ride only on the first one. Their payoff is therefore , where P a (c a * )ϩP t (c t * )ՅQ a (c a * )ϩP t (c t * ) because the monotonicity of P a (c a ) and conditions (3.2a) and (3.2b) imply P a (c a * )ՅQ a (c a * ). As a consequence: Proposition 2: Assume A.1 to A.10 hold and ␥°Ͻ␥Յ1, that is, c t * ϭn. If (i) P u (c u ) is monotonic in the interval [2, n]; or (ii) c u * Ͻc°u ; or (iii) c u * Ͻc°u , c°uϽn, and P t (c u * )ϪQ t (c u * ) is smaller than Q a (c u * )ϪP a (c u * )Ͼ0, then players adopt issue linkage under unanimity voting if: , the condition for players to adopt issue linkage becomes: because of (3.2a) and (3.2b). Hence, all players vote for issue linkage if P u (c u * )ϭP a (c u * )ϩP t (c u * ) -the worst payoff they can get under issue linkage -is larger than Q a (c a * )ϩP t (c t * ) -the largest payoff they get without linkage. Hence, (3.9) must hold. If P u (c u ) is hump-shaped with c u * Նc°u , c°uϽn, then Q u (c u * ) may be smaller than P u (c u * ). If not, (3.9) holds again. Q u (c u * ) is smaller than P u (c u * ) if P t (c u * )ϪQ t (c u * )ϾQ a (c u * )ϪP a (c u * ). Notice that Q a (c u )ϪP a (c u )Ͼ0 at cϭc u * , because c a * Ͻc u * . Hence, a necessary condition for Q u (c u * )ϽP u (c u * ) is P t (c u * )ϪQ t (c u * )Ͼ0, which holds because c u * Ͻc t * . As a consequence, if P t (c u * )ϪQ t (c u * )ϾQ a (c u * )ϪP a (c u * )Ͼ0, all players vote in favour of issue linkage when Q u (c u * )ϭQ a (c u * )ϩQ t (c u * ) -the worst payoff they can get under issue linkage -is larger than Q a (c a * )ϩP t (c t * ) -the largest payoff they get without linkage. Hence, (3.10) must hold. Finally, when c u * ϭn, there is no incentive to defect for any c u Յn. Hence, P u How can conditions (3.9) and (3.10) be interpreted? [P a (c u * )ϪQ a (c a * )] -the left-hand side of (3.9) -represents the gain or loss that a free-rider on the 'a-agreement' achieves from joining the expanded coalition. It can also be written as where the first term is the increased gain that a cooperator on the 'a-agreement' achieves from expanding the coalition, whereas the second term is a free-rider's relative gain when a coalition c a * forms. [P t (c t * )ϪP t (c u * )] is the possible gain or loss that goes to a cooperator in the 't-agreement' when the coalition size moves from c t * to c u * . Hence, (3.9) says that the gain (loss) that a free-rider on the 'a-agreement' achieves from joining the expanded coalition must be larger (smaller) than the gain (loss) that goes to a cooperator in the 't-agreement' when the coalition size moves from c t * to c u * . Condition (10) has a different interpretation. [Q a (c u * )ϪQ a (c a * )] is the gain that goes to a free-rider when more players cooperate on the provision of a public good. ] is the possible gain or loss that goes to a cooperator in the 't-agreement' when the coalition size moves from c t * to c u * , plus the excess benefits of cooperation when c u * Ͻc t * (recall that P t (c)ϾQ t (c) for all cϽc t * ϭn, because the agreement concerns a perfect club good). Hence, issue linkage is chosen by all players if the gain that goes to a free-rider when more players cooperate in the provision of a public good is larger than the excess benefits of cooperation when c u * Ͻc t * plus the gain (loss) that goes to a cooperator in the 't-agreement' when the coalition size moves from c t * to c u * . Let us now consider the second case, in which the club good issue linked to the public good issue is an imperfect club good. This implies that the 80 Climate negotiations and policy benefits from cooperation on the 't-agreement' which spill over to freeriders are strong enough to induce some players not to join the coalition. Hence, when players negotiate on the 't-agreement' only, the equilibrium coalition c t * is not the grand coalition, that is, c t * Ͻn. In this context, it is still important to adopt issue linkage as a strategy to increase the coalition size on the 'a-agreement' because c a * Ͻc t * . Hence, issue linkage helps players to achieve a coalition c u * larger than c a * , but smaller than c t * (Proposition 1). However, the benefits of a larger coalition on the 'a-agreement' must be traded off with the loss of a smaller coalition in the 't-agreement'. The first step to determine the equilibrium of the game is the analysis of the payoffs of the four types of players that emerge in the second stage of the game. We need to compare: , the payoff of a cooperator in both separate agreements; • P a (c a * )ϩQ t (c t * ), the payoff of a player who cooperates in the 'aagreement' but free-rides on the other one; , the payoff of a player who cooperates in the 'tagreement' but free-rides on the other one; , the payoff of a free-rider on both separate agreements. First, notice that P a (c a * )ϩP t (c t * )ϽQ a (c a * )ϩP t (c t * ) and P a (c a * )ϩQ t (c t * )Ͻ Q a (c a * )ϩQ t (c t * ) because the monotonicity of P a (c) implies P a (c a * )ϽQ a (c a * ). Hence, the largest payoff in the case of two separate agreements is the one in which a player free-rides on both agreements iff: In the rest of this chapter we will use (3.11), which says that a free-rider on the 't-agreement' achieves a larger payoff than a cooperator in the same agreement. This is reasonable if the degree of appropriability of the benefits from cooperation in the 't-agreement' is sufficiently low. We assume that this is the case for ␥Ͻ␥°. Then, the conditions for issue linkage to be an equilibrium strategy are described by the following Proposition: Proposition 3: Assume A.1 to A.10 hold, 0Յ␥Ͻ␥°, that is, c t * Ͻn, and , then players adopt issue linkage under unanimity voting iff condition (3.12) holds, that is: If c u * Ͼc°u , c°uϽn, and P t (c u * )ϪQ t (c u * ) is positive and larger than Q a (c u * )Ϫ P a (c u * ), the condition for issue linkage to be adopted becomes: c t * )ϪQ t (c u * )] (3.13) Proof: If P u (c u ) is monotonic or P u (c u ) is hump-shaped with c u * Ͻc u °, then at the equilibrium P u (c u * ϩ1)ՆP u (c u * ), which implies P u (c u * )ϭP a (c u * )ϩP t (c u * ) ϽQ u (c u * )ϭQ a (c u * )ϩQ t (c u * ) because of (3.2a and 3.2b). Hence, all players vote for issue linkage if P u (c u * )ϭP a (c u * )ϩP t (c u * ) -the worst payoff they can get under issue linkage -is larger than Q a (c a * )ϩQ t (c t * ) -the largest payoff they get without linkage. Hence, (3.12) must hold. If P u (c u ) is hump-shaped with c u * Նc°u , c°uϽn, then Q u (c u * ) may be smaller than P u (c u * ). If not, (3.12) holds again. Q u (c u * ) is smaller than P u (c u * ) if P t (c u * ) ϪQ t (c u * )ϾQ a (c u * )ϪP a (c u * ). Notice that Q a (c u )ϪP a...

A Bottom-Up, Non-Cooperative Approach to Climate Change Control: Assessment and Comparison of Nationally Determined Contributions (NDCs)

Journal of Sustainable Development, 2016

International negotiations on climate change control are moving away from a global cooperative ag... more International negotiations on climate change control are moving away from a global cooperative agreement (at least from the ambition to achieve it) to adopt a bottom-up framework composed of unilateral pledges of domestic measures and policies. This shift from cooperative to voluntary actions to control GHG emissions already started in Copenhagen at COP 15 in 2007 and became a platform formally adopted by a large number of countries in Paris at COP 21. The new architecture calls for a mechanism to review the nationally determined contributions (NDCs) of the various signatories and assess their adequacy. Most importantly, countries’ voluntary pledges need to be compared to assess the fairness, and not only the effectiveness, of the resulting outcome. This assessment is crucial to support future, more ambitious, commitments to reduce GHG emissions. It is therefore important to identify criteria and quantitative indicators to assess and compare the NDCs.

Behavioral and Distributional Effects of Environmental Policy

NBER Books, 2001

Modelling Negotiated Decision Making: a Multilateral, Multiple Issues, Non-Cooperative Bargaining Model with Uncertainty

Social Science Research Network, Jul 1, 2007

The relevance of bargaining to everyday life can easily be ascertained, yet the study of any barg... more The relevance of bargaining to everyday life can easily be ascertained, yet the study of any bargaining process is extremely hard, involving a multiplicity of questions and complex issues. The objective of this paper is to provide new insights on some dimensions of the bargaining process -asymmetries and uncertainties in particular -by using a non-cooperative game theory approach. We develop a computational model which simulates the process of negotiation among more than two players, who bargain over the sharing of more than one pie. Through numerically simulating several multiple issues negotiation games among multiple players, we identify the main features of players' optimal strategies and equilibrium agreements. As in most economic situations, uncertainty crucially affects also bargaining processes. Therefore, in our analysis, we introduce uncertainty over the size of the pies to be shared and assess the impacts on players' strategic behaviour. Our results confirm that uncertainty crucially affects players' behaviour and modifies the likelihood of a self-enforcing agreement to emerge. The model proposed here can have several applications, in particular in the field of natural resource management, where conflicts over how to share a resource of a finite size are increasing.

Transition to Sustainability: Some Preliminary Conclusions

Edward Elgar Publishing eBooks, Jul 30, 2009

Economic and Environmental Effectiveness of a Technology-based Protocol

Social Science Research Network, Jun 1, 2004

... the adoption of an international agreement in which all countries find it profitable to coope... more

Stable coalitions

Edward Elgar Publishing eBooks, Jun 26, 2003

The Allocation of European Union Allowances: Lessons, Unifying Themes and General Principles

Energy Markets and Sustainability in a Larger Europe,9th IAEE European Conference,June 10-31, 2007, Oct 1, 2006

The lessons and unifying themes presented here draw upon eleven contributions, which constitute t... more The lessons and unifying themes presented here draw upon eleven contributions, which constitute the core of the book and which describe the experience of allocation in ten member-states of the European Union and as experienced in Brussels. We are endebted to the European Commission, FEEM, and MIT's Center for Energy and Environmental Policy Research and Joint Program on the Science and Policy of Global Change for the various forms of financial and other support that made this book possible. But out greatest debt is to the other participants of this project who were able to make sense of the allocation process in their countries and thereby provide the material from which these conclusions could be drawn. We also thank Martin Cames for helpful comments. None of them should be held responsible for the views we express here and all errors of fact and interpretation are ours alone. about the final allowance allocations represented on of the major reasons why significant activities in the EU ETS were still rare until the beginning of 2004, information on the allocation process had strong implications on the market developments. In particular, rumours and decisions on the National Allocation Plans (NAPs) spurred substantial volumetric activity and price movement. The reason for this development is that the initial allocation of emission rights determines the overall shortage of the market. Given the importance of the allocation process for the overall efficiency of any potential emission trading scheme, the process of allocating the emission allowances in Europe has attracted world-wide attention. For this reason, the main objective of the present paper is to distill the lessons and general principles to be learnt from the world's first experience with allocating carbon allowances to sub-national entities based on insights emerging from ten Member States 3 . We discuss the lessons that emerge from this experience and make some concluding comments on what seem to be more general principles informing the allocation process and on what are the global implications of the EU ETS. As has become obvious during the first allocation phase, the diversity of experience among the Member States is considerable, so that it must be understood that these lessons and unifying themes are drawn from the experience of most of the Member States, not necessarily from all. For every lesson and each general principle, there is typically at least one Member State for which it does not apply, or it does so only weakly. Accordingly, as is true of all lessons and concluding comments, these will need to be applied carefully and some may not apply to future allocations in the EU ETS or to the circumstances surrounding future allocations of CO 2 rights by other countries. Still, it seems likely that most of the problems experienced by the Member States of the European Union will be encountered by others who follow this example and that the lessons and general principles drawn from them will be helpful. These lessons and unifying observations are grouped in three categories: those concerning the conditions encountered (section 2), the processes employed (section 3), and the actual choices (section 4). The last section closes with some comments about the uniqueness of this policy experiment, both as regards more general principles and its global implications. 3 The analysis has focused on ten representative Member States, including (in alphabetical order) Czech Republic,

How can China help reduce climate policy costs

COP21 Side Event on Transparency, Policy Surveillance and Levels of Effort

Review of Environment, Energy and Economics - Re, 2015

A natural outcome of the emerging "pledge and review" approach to international climate... more A natural outcome of the emerging "pledge and review" approach to international climate change policy is the interest in comparing mitigation efforts among countries. Many will want to know if similar or “peer” countries are undertaking (or planning to undertake) a “comparable” effort in mitigating their greenhouse gas emissions. The speakers at this side event on "Transparency, Policy Surveillance and Levels of Effort" presented a framework for comparing mitigation efforts across nations, drawing from a set of principles for designing and implementing informative metrics. The event was co-organized by FEEM, the Research Institute of Innovative Technology for the Earth (RITE) and Resources for the Future (RFF).

A Stochastic Multiple Players Multi-Issues Bargaining Model for the Piave River Basin

Social Science Research Network, 2007

The objective of this paper is to investigate the usefulness of non-cooperative bargaining theory... more The objective of this paper is to investigate the usefulness of non-cooperative bargaining theory for the analysis of negotiations on water allocation and management. We explore the impacts of different economic incentives, a stochastic environment and varying individual preferences on players' strategies and equilibrium outcomes through numerical simulations of a multilateral, multiple issues, non-cooperative bargaining model of water allocation in the Piave River Basin, in the North East of Italy. Players negotiate in an alternating-offer manner over the sharing of water resources (quantity and quality). Exogenous uncertainty over the size of the negotiated amount of water is introduced to capture the fact that water availability is not known with certainty to negotiating players. We construct the players' objective function with their direct input. We then test the applicability of our multiple players, multi-issues, stochastic framework to a specific water allocation problem and conduct comparative static analyses to assess sources of bargaining power. Finally, we explore the implications of different attitudes and beliefs over water availability.

La strada da percorrere: come ridurre emissioni e uso di energia del settore trasporti in Italia

Nature Italy, Aug 8, 2022

Front matter, acknowledgments, table of contents

Energy and Climate Change in China

BRILL eBooks, 2013

This paper examines future energy and emissions scenarios in China generated by the Integrated As... more This paper examines future energy and emissions scenarios in China generated by the Integrated Assessment Model WITCH. A Business-as-Usual scenario is compared with five scenarios in which Greenhouse Gases emissions are taxed, at different levels. The elasticity of China's emissions is estimated by pooling observations from all scenarios and compared with the elasticity of emissions in OECD countries. China has a higher elasticity than the OECD for a carbon tax lower than 50$ per ton of CO2-eq. For higher taxes, emissions in OECD economies are more elastic than in China. Our best guess indicates that China would need to introduce a tax equal to about 750$ per ton of CO2-eq in 2050 to achieve the Major Economies Forum goal set for mid-century. In our preferred estimates, the discounted cost of following the 2°C trajectory is equal to 5.4% and to 2.7% of GDP in China and the OECD, respectively.

Behavioral and Distributional Effects of Environmental Policy Introduction

National Bureau of Economic Research, 2000

The views expressed herein are those of the authors and do not necessarily reflect those of the N... more

Editorial: Reconciling Domestic Energy Needs and Global Climate Policy: Challenges and Opportunities for China and India

It is unanimously recognized that emissions from China and India will be responsible for a large ... more It is unanimously recognized that emissions from China and India will be responsible for a large fraction of the incremental growth of Greenhouse Gases (GHGs) in the atmosphere in the next decades (IEA 2010; EIA 2011; Clarke et al. 2009). This explains, at least partly, the reluctance of the United States to take on any binding commitment to reduce GHGs emissions if China and other major developing economies do not make any steps to reduce their own GHGs emissions. At the same time, major developing countries are not willing to make costly efforts to reduce GHG emissions if developed economies do not rapidly commit to drastic emissions reductions. This contraposition has been one of the causes of the lack of substantial progress in international climate change negotiations. The Copenhagen Summit has marked a change. For the first time, all major developing countries have pledged to take steps to control the growth of their GHGs emissions. The ''Copenhagen Pledges'', although informal and insufficient according to some critics (UNEP 2010), have been confirmed at the Cancun climate talks in December 2010 and will very likely characterize the post-Kyoto climate agenda until 2020. This special issue collects a set of articles that take stock of the current status of the negotiations and suggest an unconventional, pragmatic way forward. All the articles recognize that China and India will not enter a textbook-style international climate agreement soon. They are also aware that the future international climate architecture will be fragmented and incomplete at least until 2020 (Carraro and Massetti 2011; Aldy and Stavins 2007). Therefore, the inability to build a large binding agreement with absolute targets is not seen as a tragedy, but rather as a fact that should be considered as a starting point for future steps toward global emission reductions. For this reason, all articles take a long-term perspective. As Zhang notes in his article, the real question when dealing with China and India is post-2020 and not pre-2020.

Article in Press

Journal of Policy Modeling

A Stochastic Multiple Players Multi-Issues Bargaining Model for the Piave River Basin

Social Science Research Network, 2007

The objective of this paper is to investigate the usefulness of non-cooperative bargaining theory... more The objective of this paper is to investigate the usefulness of non-cooperative bargaining theory for the analysis of negotiations on water allocation and management. We explore the impacts of different economic incentives, a stochastic environment and varying individual preferences on players' strategies and equilibrium outcomes through numerical simulations of a multilateral, multiple issues, non-cooperative bargaining model of water allocation in the Piave River Basin, in the North East of Italy. Players negotiate in an alternating-offer manner over the sharing of water resources (quantity and quality). Exogenous uncertainty over the size of the negotiated amount of water is introduced to capture the fact that water availability is not known with certainty to negotiating players. We construct the players' objective function with their direct input. We then test the applicability of our multiple players, multi-issues, stochastic framework to a specific water allocation problem and conduct comparative static analyses to assess sources of bargaining power. Finally, we explore the implications of different attitudes and beliefs over water availability.

Factor-Augmenting Technical Change: An Empirical Assessment

Social Science Research Network, 2009

Starting from a system of factor demands, an empirical model that allows estimating factoraugment... more Starting from a system of factor demands, an empirical model that allows estimating factoraugmenting technical change is derived. Factor-augmenting technical change is defined as the improvement in factor productivities that can occur either exogenously or endogenously, with changes in other macroeconomic variables. This paper provides additional estimates for the substitution possibilities among inputs and it offers new empirical evidence on the direction and sources of factor-augmenting technical change, an issue that has not yet been explored by the empirical literature on growth determinants. The empirical findings suggest that technical change is directed. Technical change tends to be more energy-saving than capital-and labour-saving. Both R&D investments and international trade are important determinants of growth in energy and capital productivity whereas technical change for labour is positively related to education expenditure. Therefore, the sources of factor-augmenting technical change go beyond R&D investments, as proposed in the theory of directed technical change, and they differ across inputs. In other words, not only is technical change directed, the sources of factor-augmenting technical change appear to be input specific.

International Economic Policy Coordination

Springer eBooks, 2005

The use of general descriptive names, registered names, trademarks, etc. in this publication does... more

Endogenous Strategic Issue Linkage in International Negotiations

This assumption enables us to adopt the usual Nash equilibrium concept to identify the equilibriu... more This assumption enables us to adopt the usual Nash equilibrium concept to identify the equilibrium of the coalition game. Different results could be obtained under exclusive membership or coalition unanimity (cf. . Let us introduce a few definitions. Let c u * denote the equilibrium number of players who sign the linked agreement (that is, when issue linkage is chosen in the first stage of the game). Then P u (c u * ) is their equilibrium payoff. The remaining nϪc u * players are the free-riders of the linked agreement. Their equilibrium payoff is Q u (c u * ). If linkage is not adopted, we have two agreements. Let 'a' identify the agreement whose benefits are not excludable (for instance, the environmental agreement), whereas 't' identifies the agreement with (partly) excludable benefits (for example, the agreement on technological cooperation). Then, let c a * be the equilibrium number of players who sign the public good agreement, or 'a-agreement', whereas c t * is the equilibrium number of signatories of the (quasi) club good agreement, or 't-agreement'. P a (c a * ) is the equilibrium payoff of the former, whereas P t (c t * ) is the equilibrium payoff of the latter. Finally, free-riders of the 'a-agreement' obtain a payoff equal to Q a (c a * ), whereas free-riders of the 't-agreement' obtain From (3.3a) it is clear that, if the two separate agreements are profitable, then the linked agreement is also profitable. However, a linked agreement Proposition 1: At the equilibrium, c u * Յc t * , that is, the number of players who participate in the linked agreement is always smaller than or equal to the number of players who participate in the (club good) agreement linked to the public good agreement. The linked agreement is internally stable When c u * Ͼc a * , the left-hand side of (3.7) is positive because there is an incentive to free-ride on the 'a-agreement' for all cϾc a * . This implies that the right-hand side is also positive, that is, P t (c u * )ϾQ t (c u * Ϫ1). Therefore, as far as the 't-agreement' is concerned, there is still an incentive to enter the coalition. Hence, c u * must be smaller than or equal to the equilibrium coalition size c t * , that is, c u * Յc t * . The conclusion shown by Proposition 1 holds both in Case A and in Case B. The only difference is that, in Case A, P t (c)ϪQ t (cϪ1) is non-negative for all c in the interval [2, n] because this is the condition which implies c t * ϭn. Hence, P t (c)ϪQ t (cϪ1) is obviously non-negative also for cϭc u * . Note that Proposition 1 and the preceding analysis lead to the following ordering: c a * Ͻc u * Յc t * and c°t Յc°u . (3.8) The payoff functions of the two separate games and of the linked game are shown in Figures 3.5 and 3.6 for Cases A and B respectively. Both figures deal with the situation in which c u * Ͼc°u. These figures will be useful to clarify the analysis of the equilibrium of the game. We are now ready to determine players' equilibrium choice in the first stage of the game. In Case A, the situation is simpler, because, if players negotiate only on the 't-agreement', at the equilibrium all countries would like to sign it (c t * ϭn). Hence, if players disagree on linkage, either they cooperate on both the 'a-agreement' and the 't-agreement', or they free-ride only on the first one. Their payoff is therefore , where P a (c a * )ϩP t (c t * )ՅQ a (c a * )ϩP t (c t * ) because the monotonicity of P a (c a ) and conditions (3.2a) and (3.2b) imply P a (c a * )ՅQ a (c a * ). As a consequence: Proposition 2: Assume A.1 to A.10 hold and ␥°Ͻ␥Յ1, that is, c t * ϭn. If (i) P u (c u ) is monotonic in the interval [2, n]; or (ii) c u * Ͻc°u ; or (iii) c u * Ͻc°u , c°uϽn, and P t (c u * )ϪQ t (c u * ) is smaller than Q a (c u * )ϪP a (c u * )Ͼ0, then players adopt issue linkage under unanimity voting if: , the condition for players to adopt issue linkage becomes: because of (3.2a) and (3.2b). Hence, all players vote for issue linkage if P u (c u * )ϭP a (c u * )ϩP t (c u * ) -the worst payoff they can get under issue linkage -is larger than Q a (c a * )ϩP t (c t * ) -the largest payoff they get without linkage. Hence, (3.9) must hold. If P u (c u ) is hump-shaped with c u * Նc°u , c°uϽn, then Q u (c u * ) may be smaller than P u (c u * ). If not, (3.9) holds again. Q u (c u * ) is smaller than P u (c u * ) if P t (c u * )ϪQ t (c u * )ϾQ a (c u * )ϪP a (c u * ). Notice that Q a (c u )ϪP a (c u )Ͼ0 at cϭc u * , because c a * Ͻc u * . Hence, a necessary condition for Q u (c u * )ϽP u (c u * ) is P t (c u * )ϪQ t (c u * )Ͼ0, which holds because c u * Ͻc t * . As a consequence, if P t (c u * )ϪQ t (c u * )ϾQ a (c u * )ϪP a (c u * )Ͼ0, all players vote in favour of issue linkage when Q u (c u * )ϭQ a (c u * )ϩQ t (c u * ) -the worst payoff they can get under issue linkage -is larger than Q a (c a * )ϩP t (c t * ) -the largest payoff they get without linkage. Hence, (3.10) must hold. Finally, when c u * ϭn, there is no incentive to defect for any c u Յn. Hence, P u How can conditions (3.9) and (3.10) be interpreted? [P a (c u * )ϪQ a (c a * )] -the left-hand side of (3.9) -represents the gain or loss that a free-rider on the 'a-agreement' achieves from joining the expanded coalition. It can also be written as where the first term is the increased gain that a cooperator on the 'a-agreement' achieves from expanding the coalition, whereas the second term is a free-rider's relative gain when a coalition c a * forms. [P t (c t * )ϪP t (c u * )] is the possible gain or loss that goes to a cooperator in the 't-agreement' when the coalition size moves from c t * to c u * . Hence, (3.9) says that the gain (loss) that a free-rider on the 'a-agreement' achieves from joining the expanded coalition must be larger (smaller) than the gain (loss) that goes to a cooperator in the 't-agreement' when the coalition size moves from c t * to c u * . Condition (10) has a different interpretation. [Q a (c u * )ϪQ a (c a * )] is the gain that goes to a free-rider when more players cooperate on the provision of a public good. ] is the possible gain or loss that goes to a cooperator in the 't-agreement' when the coalition size moves from c t * to c u * , plus the excess benefits of cooperation when c u * Ͻc t * (recall that P t (c)ϾQ t (c) for all cϽc t * ϭn, because the agreement concerns a perfect club good). Hence, issue linkage is chosen by all players if the gain that goes to a free-rider when more players cooperate in the provision of a public good is larger than the excess benefits of cooperation when c u * Ͻc t * plus the gain (loss) that goes to a cooperator in the 't-agreement' when the coalition size moves from c t * to c u * . Let us now consider the second case, in which the club good issue linked to the public good issue is an imperfect club good. This implies that the 80 Climate negotiations and policy benefits from cooperation on the 't-agreement' which spill over to freeriders are strong enough to induce some players not to join the coalition. Hence, when players negotiate on the 't-agreement' only, the equilibrium coalition c t * is not the grand coalition, that is, c t * Ͻn. In this context, it is still important to adopt issue linkage as a strategy to increase the coalition size on the 'a-agreement' because c a * Ͻc t * . Hence, issue linkage helps players to achieve a coalition c u * larger than c a * , but smaller than c t * (Proposition 1). However, the benefits of a larger coalition on the 'a-agreement' must be traded off with the loss of a smaller coalition in the 't-agreement'. The first step to determine the equilibrium of the game is the analysis of the payoffs of the four types of players that emerge in the second stage of the game. We need to compare: , the payoff of a cooperator in both separate agreements; • P a (c a * )ϩQ t (c t * ), the payoff of a player who cooperates in the 'aagreement' but free-rides on the other one; , the payoff of a player who cooperates in the 'tagreement' but free-rides on the other one; , the payoff of a free-rider on both separate agreements. First, notice that P a (c a * )ϩP t (c t * )ϽQ a (c a * )ϩP t (c t * ) and P a (c a * )ϩQ t (c t * )Ͻ Q a (c a * )ϩQ t (c t * ) because the monotonicity of P a (c) implies P a (c a * )ϽQ a (c a * ). Hence, the largest payoff in the case of two separate agreements is the one in which a player free-rides on both agreements iff: In the rest of this chapter we will use (3.11), which says that a free-rider on the 't-agreement' achieves a larger payoff than a cooperator in the same agreement. This is reasonable if the degree of appropriability of the benefits from cooperation in the 't-agreement' is sufficiently low. We assume that this is the case for ␥Ͻ␥°. Then, the conditions for issue linkage to be an equilibrium strategy are described by the following Proposition: Proposition 3: Assume A.1 to A.10 hold, 0Յ␥Ͻ␥°, that is, c t * Ͻn, and , then players adopt issue linkage under unanimity voting iff condition (3.12) holds, that is: If c u * Ͼc°u , c°uϽn, and P t (c u * )ϪQ t (c u * ) is positive and larger than Q a (c u * )Ϫ P a (c u * ), the condition for issue linkage to be adopted becomes: c t * )ϪQ t (c u * )] (3.13) Proof: If P u (c u ) is monotonic or P u (c u ) is hump-shaped with c u * Ͻc u °, then at the equilibrium P u (c u * ϩ1)ՆP u (c u * ), which implies P u (c u * )ϭP a (c u * )ϩP t (c u * ) ϽQ u (c u * )ϭQ a (c u * )ϩQ t (c u * ) because of (3.2a and 3.2b). Hence, all players vote for issue linkage if P u (c u * )ϭP a (c u * )ϩP t (c u * ) -the worst payoff they can get under issue linkage -is larger than Q a (c a * )ϩQ t (c t * ) -the largest payoff they get without linkage. Hence, (3.12) must hold. If P u (c u ) is hump-shaped with c u * Նc°u , c°uϽn, then Q u (c u * ) may be smaller than P u (c u * ). If not, (3.12) holds again. Q u (c u * ) is smaller than P u (c u * ) if P t (c u * ) ϪQ t (c u * )ϾQ a (c u * )ϪP a (c u * ). Notice that Q a (c u )ϪP a...

A Bottom-Up, Non-Cooperative Approach to Climate Change Control: Assessment and Comparison of Nationally Determined Contributions (NDCs)

Journal of Sustainable Development, 2016

International negotiations on climate change control are moving away from a global cooperative ag... more International negotiations on climate change control are moving away from a global cooperative agreement (at least from the ambition to achieve it) to adopt a bottom-up framework composed of unilateral pledges of domestic measures and policies. This shift from cooperative to voluntary actions to control GHG emissions already started in Copenhagen at COP 15 in 2007 and became a platform formally adopted by a large number of countries in Paris at COP 21. The new architecture calls for a mechanism to review the nationally determined contributions (NDCs) of the various signatories and assess their adequacy. Most importantly, countries’ voluntary pledges need to be compared to assess the fairness, and not only the effectiveness, of the resulting outcome. This assessment is crucial to support future, more ambitious, commitments to reduce GHG emissions. It is therefore important to identify criteria and quantitative indicators to assess and compare the NDCs.

Behavioral and Distributional Effects of Environmental Policy

NBER Books, 2001

Modelling Negotiated Decision Making: a Multilateral, Multiple Issues, Non-Cooperative Bargaining Model with Uncertainty

Social Science Research Network, Jul 1, 2007

The relevance of bargaining to everyday life can easily be ascertained, yet the study of any barg... more The relevance of bargaining to everyday life can easily be ascertained, yet the study of any bargaining process is extremely hard, involving a multiplicity of questions and complex issues. The objective of this paper is to provide new insights on some dimensions of the bargaining process -asymmetries and uncertainties in particular -by using a non-cooperative game theory approach. We develop a computational model which simulates the process of negotiation among more than two players, who bargain over the sharing of more than one pie. Through numerically simulating several multiple issues negotiation games among multiple players, we identify the main features of players' optimal strategies and equilibrium agreements. As in most economic situations, uncertainty crucially affects also bargaining processes. Therefore, in our analysis, we introduce uncertainty over the size of the pies to be shared and assess the impacts on players' strategic behaviour. Our results confirm that uncertainty crucially affects players' behaviour and modifies the likelihood of a self-enforcing agreement to emerge. The model proposed here can have several applications, in particular in the field of natural resource management, where conflicts over how to share a resource of a finite size are increasing.

Transition to Sustainability: Some Preliminary Conclusions

Edward Elgar Publishing eBooks, Jul 30, 2009

Economic and Environmental Effectiveness of a Technology-based Protocol

Social Science Research Network, Jun 1, 2004

... the adoption of an international agreement in which all countries find it profitable to coope... more

Stable coalitions

Edward Elgar Publishing eBooks, Jun 26, 2003

The Allocation of European Union Allowances: Lessons, Unifying Themes and General Principles

Energy Markets and Sustainability in a Larger Europe,9th IAEE European Conference,June 10-31, 2007, Oct 1, 2006

The lessons and unifying themes presented here draw upon eleven contributions, which constitute t... more The lessons and unifying themes presented here draw upon eleven contributions, which constitute the core of the book and which describe the experience of allocation in ten member-states of the European Union and as experienced in Brussels. We are endebted to the European Commission, FEEM, and MIT's Center for Energy and Environmental Policy Research and Joint Program on the Science and Policy of Global Change for the various forms of financial and other support that made this book possible. But out greatest debt is to the other participants of this project who were able to make sense of the allocation process in their countries and thereby provide the material from which these conclusions could be drawn. We also thank Martin Cames for helpful comments. None of them should be held responsible for the views we express here and all errors of fact and interpretation are ours alone. about the final allowance allocations represented on of the major reasons why significant activities in the EU ETS were still rare until the beginning of 2004, information on the allocation process had strong implications on the market developments. In particular, rumours and decisions on the National Allocation Plans (NAPs) spurred substantial volumetric activity and price movement. The reason for this development is that the initial allocation of emission rights determines the overall shortage of the market. Given the importance of the allocation process for the overall efficiency of any potential emission trading scheme, the process of allocating the emission allowances in Europe has attracted world-wide attention. For this reason, the main objective of the present paper is to distill the lessons and general principles to be learnt from the world's first experience with allocating carbon allowances to sub-national entities based on insights emerging from ten Member States 3 . We discuss the lessons that emerge from this experience and make some concluding comments on what seem to be more general principles informing the allocation process and on what are the global implications of the EU ETS. As has become obvious during the first allocation phase, the diversity of experience among the Member States is considerable, so that it must be understood that these lessons and unifying themes are drawn from the experience of most of the Member States, not necessarily from all. For every lesson and each general principle, there is typically at least one Member State for which it does not apply, or it does so only weakly. Accordingly, as is true of all lessons and concluding comments, these will need to be applied carefully and some may not apply to future allocations in the EU ETS or to the circumstances surrounding future allocations of CO 2 rights by other countries. Still, it seems likely that most of the problems experienced by the Member States of the European Union will be encountered by others who follow this example and that the lessons and general principles drawn from them will be helpful. These lessons and unifying observations are grouped in three categories: those concerning the conditions encountered (section 2), the processes employed (section 3), and the actual choices (section 4). The last section closes with some comments about the uniqueness of this policy experiment, both as regards more general principles and its global implications. 3 The analysis has focused on ten representative Member States, including (in alphabetical order) Czech Republic,

How can China help reduce climate policy costs

COP21 Side Event on Transparency, Policy Surveillance and Levels of Effort

Review of Environment, Energy and Economics - Re, 2015

A natural outcome of the emerging "pledge and review" approach to international climate... more A natural outcome of the emerging "pledge and review" approach to international climate change policy is the interest in comparing mitigation efforts among countries. Many will want to know if similar or “peer” countries are undertaking (or planning to undertake) a “comparable” effort in mitigating their greenhouse gas emissions. The speakers at this side event on "Transparency, Policy Surveillance and Levels of Effort" presented a framework for comparing mitigation efforts across nations, drawing from a set of principles for designing and implementing informative metrics. The event was co-organized by FEEM, the Research Institute of Innovative Technology for the Earth (RITE) and Resources for the Future (RFF).

A Stochastic Multiple Players Multi-Issues Bargaining Model for the Piave River Basin

Social Science Research Network, 2007

The objective of this paper is to investigate the usefulness of non-cooperative bargaining theory... more The objective of this paper is to investigate the usefulness of non-cooperative bargaining theory for the analysis of negotiations on water allocation and management. We explore the impacts of different economic incentives, a stochastic environment and varying individual preferences on players' strategies and equilibrium outcomes through numerical simulations of a multilateral, multiple issues, non-cooperative bargaining model of water allocation in the Piave River Basin, in the North East of Italy. Players negotiate in an alternating-offer manner over the sharing of water resources (quantity and quality). Exogenous uncertainty over the size of the negotiated amount of water is introduced to capture the fact that water availability is not known with certainty to negotiating players. We construct the players' objective function with their direct input. We then test the applicability of our multiple players, multi-issues, stochastic framework to a specific water allocation problem and conduct comparative static analyses to assess sources of bargaining power. Finally, we explore the implications of different attitudes and beliefs over water availability.

La strada da percorrere: come ridurre emissioni e uso di energia del settore trasporti in Italia

Nature Italy, Aug 8, 2022