Efficiency vs. Stability in Climate Coalitions: A Conceptual and Computational Appraisal

Abstract

This paper evaluates with numerical computations the respective merits of two competing notions of coalition stability in the standard global public goods model of climate change. To this effect it uses the CWS integrated assessment model. After a reminder of the two game theoretical stability notions involved—core-stability and internal-external stability—and of the CWS model, the former property is shown to hold for the grand coalition if resource transfers of a specific form between countries are introduced. The latter property appears to hold neither for the grand coalition nor for most large coalitions whereas it is verified for most small coalitions in a weak sense that involves transfers. Finally, coalitions, stable in either sense, that perform best in terms of carbon concentration and global welfare are always heterogeneous ones. Therefore, if coalitional stability is taken as an objective, promoting small or homogeneous coalitions is not to be recommended.