International Environmental Cooperation: Determinants, Interlinkages, and Impacts

• Applicants: Professor Dr. Mario Larch; Professor Dr. Joschka Wanner
• Subject Area: Economic Policy, Applied Economics ; Statistics and Econometrics
• Term: since 2023
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 518604731

What are the determinants of international environmental agreements (IEAs)? Which country pairs are particularly likely to agree on environmental cooperation? Is the parallel surge in regional trade agreements (RTAs) and IEAs a coincidence or are these related patterns? And what can we learn from the evaluation of specific IEAs? The number of IEAs has surged over the last decades. At the same time, economic theory suggests that such agreements face an uphill battle in actually tackling or solving the environmental concerns they are designed for, among others due to a lack of enforceability. How can the increase be explained then? As a first step, we set up a theory-founded empirical investigation of the determinants of IEAs. Importantly, we will focus on the bilateral dimension, i.e. which country pairs agree on environmental cooperation with each other, rather than on the unilateral dimension of which countries sign a large number of agreements. This bilateral view mimics the large literature on the determinants of RTAs. The number of RTAs has seen a comparably steep increase over the last decades, raising the question of whether country pairs may link the negotiations cooperation in different policy areas, a concept known as issue linkage. In the second part of the project, we investigate whether there is evidence for issue linkage. Developing countries may e.g. link their signing of an environmental agreement brought forward by a developed country to the conclusion of an additional trade agreement that ensures better access to the developed country’s market. Besides the agreement level view, we will also consider weaker forms of issue linkage in which an IEA may e.g. not be linked to a full-blown RTA, but rather to some specific trade facilitation measures. While the first two parts of the project hence take a bird’s eye view on international environmental cooperation, trying to identify general patterns based on data on a large number of IEAs, the third, and last, part of the project instead focusses on two specific international environmental agreements that are currently under debate, but have not yet been agreed upon: a supply-side climate agreement and the World Trade Organization’s Environmental Goods Agreement (EGA). In the former, countries that supply fossil fuels would agree on limiting fossil fuel extraction, complementing the traditional demand-side approach of climate policy taken e.g. in the Paris Agreement. In the EGA, countries would liberalize e.g. the trade of goods relevant for renewable energy production, making the energy transition cheaper. The methodological approach in the third part of the project relies on quantitative theory models instead of econometric methods. Specifically, we will develop quantitative models that allow the counterfactual simulation of the two agreements to investigate whether they are effective in supporting the fight against man-made climate change.

• DFG Programme: Research Grants
• International Connection: Netherlands
• Co-Investigator: Dr. Amrei Stammann
• Cooperation Partner: Professorin Dr. Michaela Kesina