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Climate Agreements and Technology Policy

Rolf Golombek and Michael Hoel

NOTA DI LAVORO 90.2004

MAY 2004 GG – Global Governance

Rolf Golombek, Frisch Centre

Michael Hoel, Department of Economics, University of Oslo

Climate Agreements and Technology Policy Summary We study climate policy when there are technology spillovers within and across countries, and the technology externalities within each country are corrected through a domestic subsidy of R&D investments. We compare the properties of international climate agreements when the inter-country externalities from R&D are not regulated through the climate agreement. With an international agreement controlling abatements directly through emission quotas, the equilibrium R&D subsidy is lower that the socially optimal subsidy. The equilibrium subsidy is even lower if the climate agreement does not specify emission levels directly, but instead imposes a common carbon tax. Social costs are higher under a tax agreement than under a quota agreement. Moreover, for a reasonable assumption on the abatement cost function, R&D investments and abatement levels are lower under a tax agreement than under a quota agreement. Total emissions may be higher or lower in a second-best optimal quota agreement than in the first-best optimum.

Keywords: Climate policy, International environmental agreements, R&D Policy, Technology spillovers

JEL Classification: O30, H23, Q20, Q28, Q48

Research support of the Research Council of Norway under the programme SAMSTEMT is gratefully acknowledged. Address for correspondence: Michael Hoel Department of Economics University of Oslo P.O. Box 1095 Blindern N-0317 Oslo Norway Phone: +47 22 858387 Fax: +47 22 855035 E-mail: mihoel@econ.uio.no

2

1 Introduction

If dramatic future climate changes are to be avoided, there must be a significant

reduction in global greenhouse gas emissions compared with the “business as

usual” development of emissions. Moreover, a significant reduction in global

greenhouse gas emissions will require (i) cooperation among countries and (ii)

development of new technology if such reductions are to be achieved without

excessive costs. The interaction between the design of international climate

agreements and endogenous technology development is therefore an important

issue.

Several recent articles have studied interactions between endogenous

technological change and environmental policy, see e.g. Jaffe et al. (2002) and

Löschel (2002) for overviews. Most of the contributions dealing explicitly with

the climate problem neglect interactions between countries, and simply

consider the world as one unit with a central planner.1 There is, however, a

literature that focuses explicitly on interactions between countries in a context

of endogenous technology development, see Ploeg and de Zeeuw (1994),

Xepapadeas (1995), Katsoulacos (1997), Buonanno et al. (2003), Rosendahl

(2002) and Ben Youssef (2003).

Two papers by Carraro and Marchiori (2003) and Buchner and Carraro (2004)

are particularly relevant for the issues discussed in the present paper. In both

papers it is assumed that there are technology spillovers between countries, but

that free riding countries to some extent can be excluded from these spillovers.

The issue in Carraro and Marchiori (2003) is whether or not negotiations on

R&D cooperation and on emissions reductions should be linked. They derive

conditions under which a linkage of these two issues is an equilibrium of the

negotiation game. Buchner and Carraro (2004) use a numerical model to study

the properties of an agreement only on R&D cooperation, and not explicitly on

1 See e.g. Carraro (1998), Fischer (2000), Goulder and Mathai (2000), Goulder and Schneider (1999), Nordhaus (2000) and Rasmussen (2001).

3

emissions reductions. They show that if a sufficiently large part of the

technology spillovers can be limited to the cooperating countries, all countries

will wish to participate in the R&D agreement. However, the numerical model

used suggests that the total amount of greenhouse gas emissions will be higher

under such an agreement than in the case of no cooperation.

None of the articles listed above focus explicitly, however, on how the design

of an international agreement on greenhouse gas emissions might affect the

incentives for technology development. This is one of the issues treated in

Golombek and Hoel (2003), where it is assumed that R&D investments in each

country are beneficial also for other countries through technology spillovers2.

Various types of non-cooperative and cooperative outcomes are studied. In

particular, the paper compares different types of climate agreements that

regulate emissions, but don’t include policies towards R&D investments. The

justification for this limitation of the agreements, which is in contrast to what is

assumed in Carraro and Marchiori (2003) and Buchner and Carraro (2004), is

that policies affecting R&D expenditures are difficult to verify by other

countries. If a country is required - through an international agreement - to have

more R&D expenditures than what is individually optimal for the country, it

will be relatively easy for the country to have less R&D than required by the

agreement, but to report other expenditures and/or other policies as R&D

activities/policies.

In Golombek and Hoel (2003) it is assumed that R&D expenditures in each

country are controlled directly by the government. This assumption reflects that

the incentives for any particular firm to undertake R&D expenditures are weak

due to technology spillovers – both between countries and between domestic

firms. The government must therefore finance the R&D activities, even though

2 This feature is present also in several of the studies referred to above, although these contributions do not treat the same issues as Golombek and Hoel.

4

R&D (primarily) takes place in private firms. The government thus controls

R&D expenditures through its funding of them. In the present paper we

explicitly consider this funding. All R&D is assumed to take place in private

firms, but the R&D investments are subsidized by the government. The

purpose of the present paper is therefore to study climate policy when R&D

takes place in private firms and there are technology spillovers between

countries, but there is no instrument to correct for these international

externalities. In particular, we compare the properties of different types of

international climate agreements when the positive externalities from R&D are

not regulated through the climate agreement. By explicitly modeling R&D

investments in private firms we derive several results that have not been

derived before.3

The rest of the paper is organized as follows. In Section 2 we present the model

in more detail. In order to keep the analysis as simple as possible, we use a

static framework, thus ignoring, for example, the fact that GHG emissions are

stock pollutants. We also consider only one type of GHG, namely CO2. None

of our results are affected by this simplification. Moreover, all types of

uncertainties – like the rate of return on R&D investments - are disregarded.

Finally, all countries are assumed identical, and all firms within each country

are also identical. While this of course is a drastic simplification, the analysis

nevertheless gives insight that is relevant also in the real world.

In Section 3 we consider the first-best social optimum. This gives a particular

abatement level, and a particular level of R&D investments in each firm. This

outcome could be implemented through an ideal international agreement that

sets a common carbon tax to be used in all countries, as well as a common

subsidy rate for R&D investments for all firms in all countries.

3 Our results are given in 12 propositions. Of these, it is only the result in Proposition 6 that also was derived in Golombek and Hoel (2003), as Proposition 9 of that paper.

5

Sections 4-6 consider three types of international agreements that regulate

emissions, but don’t include policies towards R&D investments (the

justification for this limitation of the agreements was given above). Sections 4

and 5 consider an international agreement controlling abatements directly

through emission quotas. In our simple model with identical countries, it makes

no difference whether quotas are non-tradable (Section 4) or tradable (Section

5). We show that the equilibrium R&D subsidy is lower than the socially

optimal subsidy if there are technology spillovers across countries. The

equilibrium subsidy is even lower if the climate agreement does not specify

emission levels directly, but instead imposes a common carbon tax faced by all

firms in all countries (Section 6).

In the model there are 3 levels of decision makers; (i) the group of all countries

in the world, (ii) each country and (iii) firms. In Section 4-6 we study the

optimal policy of a country when the climate agreement is taken as given and

the country takes into account how domestic and foreign firms will respond to

its policy decisions. In Section 7-9 we study the optimal design of climate

agreements. We assume that all types of agreements are designed by the group

of all countries in order to minimize total social costs, given how countries will

respond to the climate agreement (and how firms will respond to the policy

decisions of countries).

In Sections 7 and 8 we study how strictly emissions should be regulated in the

climate agreement. For the quota case, emissions should be regulated so that

marginal abatement costs are higher than the sum of marginal environmental

costs in all countries. In the case of an emission tax agreement, it is not obvious

whether the common emission tax should be higher or lower than the sum of

marginal environmental costs. Under a reasonable assumption about the

abatement cost function, however, the common emission tax should be lower

than the sum of marginal environmental costs. With this condition on the cost

function we also find that the levels of abatement and R&D investments are

6

lower under the optimal tax agreement than under the optimal quota agreement.

Under the tax agreement the levels of abatement and R&D investments are also

lower than in the first-best optimum.

Section 9 compares total social costs of climate agreements. The second-best

agreements will necessarily have higher social costs than the first-best

outcome. We show that total social costs are higher in the tax case than in the

quota case. Finally, Section 10 sums up our main findings and points at topics

for future research.

2 The model

We assume there are m firms in each of n countries. All firms are identical and

undertake R&D investments. As a simplification, we neglect uncertainties and

dynamic aspects of R&D as well as patents. We assume the technology level of

a particular domestic firm depends on its own R&D investments (X), the

amount of R&D investments in the other firms in that country (x), as well as

investments in R&D in all firms abroad ( *x ).4

Technology diffusion is not perfect. For a representative domestic firm, only

part ( 1γ < ) of the R&D investments undertaken in the other domestic firms are

beneficial for the firm. Similarly, only part ( *γ γ≤ ) of the R&D investments

undertaken in foreign firms are beneficial for the domestic firm. The

technology level of a representative domestic firm is thus given by

* *( 1) ( 1)Y X m x n m xγ γ= + − + − (1)

In (1) we have assumed an additive structure of technology spillovers, that is,

the technology level of a firm depends on the sum of R&D investments

4 With identical firms, R&D investments may be equal in all firms in equilibrium. However, in order to find the equilibrium it is expedient to distinguish between the amount of R&D investments undertaken in a particular domestic firm, in other domestic firms and in foreign firms.

7

undertaken in all forms, corrected by the technology diffusion parameters (γ

and *γ ). This way of modeling spillovers can be found in a wide range of

theoretical and empirical contributions, and goes back at least to Spence

(1984). It is also used in the literature refereed to above on climate policy in the

context of interactions between countries and endogenous technology

development. In this literature there is no explicit modeling of knowledge

spillovers within each country, but spillovers across countries are modeled as in

(1). The assumptions used by Ploeg and de Zeeuw (1994) and Xepapadeas

(1995) correspond to the limiting case of * 1γ = , while the assumptions used by

e.g. Buonanno et al. (2000, 2003) and Rosendahl (2002) correspond to * 1γ < .

Although spillovers often are modeled as in (1), it is not obvious that this is the

best way of modeling technology spillovers between firms and countries.

Cohen and Levinthal (1989) have argued that the ability of a firm to learn from

other firms may depend on its own R&D effort. Graevenitz (2002) discusses

the policy implications of whether one models spillovers additively as in (1) or

in a similar way as Cohen and Levinthal suggest. We shall stick to the

“standard” formulation (1).

The technology level of a particular foreign firm ( *Y ) is determined in a similar

way as (1):

* * * * * *( 1) ( 2)Y X m x n m x m xγ γ γ= + − + − + (2)

In (2) the first term is R&D investment in the particular foreign firm, the

second term shows the spillover effect from the other (“foreign”) firms in the

same country, the third term shows the spillover effect from all other foreign

firms, whereas the last term shows the spillover effect from the “domestic”

firms.

8

With identical firms, business as usual (BAU) emissions are equal across firms,

and normalized to 1. Let A, a and *a be abatement in a particular domestic

firm, in the other domestic firms and in foreign firms, respectively. For

domestic firms, emissions are then given by 1 a− .

Each firm is faced by three types of costs; abatement costs, R&D expenditures

and emission costs (which may be emission taxes or a price for tradable

emission quotas). For all firms, abatement costs are assumed to depend both on

the level of abatement and the technology level of the firm. Hence, for

domestic firms, costs of abatement are represented by ( , )c a y , where

0caac ∂

∂′ = > , 0aac′′ > , 0yc′ < , 0yyc′′ > , 0ayc′′ < and 2( ) 0aa yy ayc c c′′ ′′ ′′− > (i.e. the c

function is strictly convex). The price of R&D investments is normalized to

one. However, we assume that the domestic government subsidizes R&D

investments by the rate σ (and the governments abroad subsidize R&D

investments by the rate *σ ).5 Finally, all firms face a cost of carbon emissions,

which we denote q and *q for domestic and foreign firms, respectively.

A particular domestic firm minimizes its total costs by choosing abatement (A)

and R&D investments (X). Hence, the firm minimizes

( , ) (1 ) (1 )c A Y X q Aσ+ − + − (3)

where the second term is net R&D expenditures, the third term is

environmental costs of the firm, and the technology level Y is given by (1). All

(the identical) domestic firms solve a similar problem, and they will thus

5 In our simple model where all R&D investments reduce abatement costs, subsidization of R&D is an obvious policy to encourage such investments. In a more complex setting where some types of R&D investments might increase BAU emissions, and it is difficult for the regulator to distinguish between different types of R&D investments, subsidizing R&D might not be a good policy. See e.g. Lund (1994) for a detailed discussion.

9

choose the same values in equilibrium ( A a= and Y y= ). The first order

conditions for this problem are thus given by:6

( , )ac a y q= (4)

( , ) 1yc a y σ− = − (5)

Equation (4) is the standard condition for optimal abatement; marginal costs of

abatement ( ac ) should equal marginal benefit of abatement, which in our model

equals the price of carbon emissions q. Further, marginal costs of R&D

investments (1 σ− ) should equal marginal benefit of these investments

( 0yc− > ).

Also all foreign firms minimize their total costs, which give us the following

first-order-conditions:

** * *( , )

ac a y q= (6)

** * *( , ) 1

yc a y σ− = − (7)

From (4) and (5) we see that the technology level of domestic firms y , as well

as abatement a, depend on σ and q, whereas (6) and (7) show that the

technology level of foreign firms *y , as well as abatement *a , depend on *σ

and *q ;

( , )y y qσ= (8)

( , )a a qσ= (9)

* * * *( , )y y qσ= (10)

* * * *( , )a a qσ= (11) 6 Throughout the paper, we assume interior equilibrium outcomes for a and x, which will be the case for suitable assumptions on the function c(a,y).

10

It follows from the properties of the abatement cost function that all of these

four functions are increasing in both their arguments.

As both y and *y depend on R&D investments undertaken in all countries, see

(1) and (2), we have (using X=x and X*=x*)

* *( , , , )x x q qσ σ= (12)

* * * *( , , , )x x q qσ σ= (13)

Hence, if the domestic government changes its R&D subsidy, R&D

investments will be affected in all (domestic and foreign) firms, and the

technology level of domestic firms will change. Note, however, that the

technology level of foreign firms will not change since for a foreign firm costs

of production, that is, costs of R&D investments and the price of carbon, have

not changed, see (10). Similarly, a change in the foreign R&D subsidy will

affect R&D investments in all (domestic and foreign) firms as well as the

technology level of foreign firms, but has no impact on the technology level of

domestic firms.

For the proceeding analysis, it is useful to have an explicit expression for (12).

This follows from (1) and (2) (and X=x, X*=x*, Y=y and Y*=y*):

( ) *x hy H h y= + − (14)

where

1* 2

*

( 1)( )1 ( 1)1 ( 1) ( 2)

n mh mm n m

γγγ γ

− −

= + − − + − + − (15)

1*1 ( 1) ( 1)H m n mγ γ

− = + − + − (16)

11

The following properties can be derived from the expressions above:

− H and h are both positive

− H is lower than h if there are spillovers across countries

− H is equal to h if there are no spillovers across countries (γ*=0)

− H and h are both equal to 1 if there are no spillovers (γ=γ*=0)

− H and h are both decreasing in γ

− H is decreasing in γ*

− h is increasing in γ*

− H is smaller than 1

− h is smaller than 1 if γ* is sufficiently small relative to γ, but may be larger

than 1 if γ* is sufficiently close to γ 7

3 The first-best social optimum

In the first best optimum, all the (mn) identical firms have the same level of

abatement ( a ) as well as identical amounts of R&D investments ( x ). Total

social costs (for a given total emission level) are therefore given by total costs

of abatement and R&D investments, that is,

[ ( , ) ]mn c a y x+ (17)

Relation (17) is minimized with respect to x subject to the definition of

technology level, which can now be written as (see (14) for the case of *y y= )

x Hy= (18)

where H is given by (16).

For given abatements, the first order condition for the first-best optimum is

7 For γ*=γ we find [ ] 121 ( 1) 1 ( 2) ( 1)h nm m nm nmγ γ γ

− = + − − + − − − , which is larger than

1 for 11

mnm

γ −>

−.

12

yc H− = (19)

Rewriting this as 1 1yc H −− = gives a straightforward interpretation: The

marginal benefit of R&D investments when all spillovers are taken into

account ( 1yc H −− ) should equal marginal costs of R&D investments. Using (5)

together with (19) we see that the social optimum can be implemented by

imposing the subsidy

1 Hσ = − (20)

on all firms. We immediately see from (20) and the properties of H that the

optimal subsidy is zero for the special case of no spillovers (γ=γ*=0).

Moreover, the optimal subsidy is larger the larger are the diffusion parameters

γ and *γ :

Proposition 1: The optimal subsidy of R&D investments is higher the greater

are the technology spillovers within countries and across countries.

The intuition of Proposition 1 is straightforward; the higher the rate of

diffusion, the more beneficial are R&D investments in one firm for all other

firms. As the social return on R&D investments increases, the optimal level of

R&D investments increases, which requires a higher technology subsidy.

Finally, note that the subsidy is constant, and hence independent of the

abatement level a as well as the technology level y. This is due to H in (20)

being independent of both a and y, which reflects the additive structure of (1).

13

4 An international agreement on abatement

In this section we assume there is an international agreement that specifies

abatement levels in all countries. These levels are implemented through

country specific emission taxes (or through country specific tradable emission

quota systems). Hence, (4) and (6) apply in this case, with q and *q being the

emission tax (or more generally, the price of carbon) imposed on domestic and

foreign firms, respectively.

As discussed in Section 2, a shift in the domestic technology subsidy σ will

have impact on R&D investments in all (domestic and foreign) firms, as well as

the technology level of domestic firms. The domestic government minimizes

total domestic social costs

[ ( , ) ]m c a y x+ (21)

with respect to the technology subsidy σ (see (8) - (13)), taking a as given.8

The first order condition is (using (8) and (14) and the equilibrium conditions * *, ,X x X x Y y= = = and * *Y y= in addition to the fact that *y is not affected

by a change in σ , cf. the discussion above)

( ) 0yyc hσ

∂+ =

∂ (22)

or, since the derivative yσ

∂∂

is positive,

yc h− = (23)

8 Strictly speaking, the government minimizes [ ( , ) ]m c a y x+ subject to q and σ , given that the domestic abatement level ma follows from the agreement.

14

Using (5), the optimal domestic technology level can be implemented through

the technology subsidy σ , which is characterized by

1 hσ = − (24)

From (20) and (24) and the properties of h we have the following results:

Proposition 2: With an international agreement on abatement, the equilibrium

subsidy of R&D investments is higher the greater are the technology spillovers

within countries and lower the greater are the technology spillovers across

countries. For sufficiently large spillovers across countries, the equilibrium

subsidy may be negative, i.e R&D investments may be taxed.

The intuition of the first part of Proposition 2, that larger domestic spillovers

imply a higher subsidy, is obvious. The intuition on the relationship between

the strength of spillovers across countries and the subsidy is as follows: With

international spillovers (and abatement given by the international agreement),

the technology level of a foreign firm depends only on the foreign technology

subsidy *σ (cf. (10)). Hence, if domestic firms, cet. par., increase their R&D

investments, foreign firms will reduce their R&D investments so that their

technology level is unchanged.9 Reduced R&D investments abroad will lower

the technology level of domestic firms through technology diffusion, and hence

lower the domestic return on R&D investments. As the leakage tends to

decrease the domestic technology level, the domestic technology subsidy

should be reduced. With no international spillovers, there is no leakage, and

hence the incentive to increase domestic R&D investments is higher, that is, the

technology subsidy is greatest in the case of no international technology

diffusion. If on the other hand international spillovers are sufficiently large,

each county has a strong incentive to reduce its own R&D investments, thereby 9 While this effect might be termed a 100 per cent leakage, the reduction in R&D investments of a foreign firm relative to the increase in domestic R&D investments depends on the number of domestic and foreign firms, as well as the diffusion parameters γ and *γ .

15

increasing R&D investments in other countries, which it benefits from.

Therefore a tax on R&D investments (corresponding to h>1) might be an

optimal policy from the perspective of each individual country.

From (19) and (23), and the properties of H and h, we also have the following

result:

Proposition 3: With an international agreement on abatement, the equilibrium

subsidy of R&D investments is equal to the first-best optimal subsidy if there

are no technology spillovers across countries. If there are technology

spillovers across countries, the equilibrium subsidy is lower than the first-best

optimal subsidy.

As noted above, when abatements are given and there is international

technology diffusion, in the non-cooperative equilibrium increased domestic

R&D investments are offset by decreased R&D investments in foreign firms. In

the first best optimum, the full social effect of R&D investments are taken into

account, and hence the optimal technology level is higher in the first best case

than in the non-cooperative case. Thus, the technology subsidy should be

highest in the first best optimum. Without international spillover effects, there

is no leakage in the non-cooperative equilibrium, and hence the technology

level, as well as the subsidy, should not differ between the first best optimum

and the non-cooperative equilibrium.

5 International tradable emission quotas

In this section we assume that all countries have signed an international climate

agreement of the Kyoto type. The agreement specifies the initial distribution of

emission quotas between countries, but allows countries to buy or sell quotas

from/to other countries. The agreement imposes no restrictions on how the

country sets its technology subsidy (or other environmental instruments). The

16

agreement only dictates that emissions should not exceed the country’s quotas

(i.e. initial endowment adjusted for quotas purchased or sold).

Let E be total emission quotas given to the “domestic” country. We assume

that an international market for quotas is established, with an equilibrium price

p for quotas. Obviously, the quota price will be lower the more quotas are

given to the countries.

The domestic country minimizes

[ ( , ) ] [ (1 ) ]m c a y x p m a E+ + − − (25)

with respect to abatement a and technology subsidy σ . In (25) the last term

shows net environmental costs as [ (1 ) ]m a E− − is the country’s net purchase of

quotas. Because all countries are identical, also with respect to the initial

distribution of emission quotas, in equilibrium net purchase of quotas is zero

for all countries. Hence, even if the number of identical countries is so low that

each country can be considered to be “large” (that is, the country takes into

account that the quota price depends on its own decisions), for each country

[ (1 ) ] [ (1 ) ] 0dp dpm a E m a Eda dσ

− − = − − = in equilibrium.

The first order condition with respect to abatement is

( , )ac a y p= (26)

that is, marginal costs of abatement ( ac ) should equal marginal benefit of

abatement, which equals the price of quotas p (increased abatement reduces net

purchase of quotas). The optimal abatement level can be implemented e.g.

through a carbon tax imposed on all domestic firms, see (4), where the price of

carbon q should equal the quota price p.

17

As in the case of an international agreement on abatement (see Section 3), the

first order condition with respect to the technology subsidy is given by (22),

where the term yσ

∂∂

as before is positive, so that (23) is valid also in the present

case. Hence, the technology subsidy does not differ between the present case

and the case of an international agreement on abatement.

With both types of agreements, R&D investments are determined according to

(5) and (7), that is, investments depend on the technology subsidy, which has

the same value in the two cases, and investments are also dependent on

abatement. Hence, if abatements (at the firm level) do not differ between the

two types of agreements, R&D investments will be equal under the two

agreements. We have thus shown the following:

Proposition 4: The equilibrium subsidy of R&D investments does not differ

between an agreement on abatement and an agreement with tradable quotas. If

abatements at the firm level are equal in the two cases, R&D investments are

also equal, that is, the two agreements are isomorphic.

With both types of agreements, the technology subsidy of a country has impact

on R&D investments in all (domestic and foreign) firms, as well as the

technology level of the country, see (8) - (13). However, there is no direct

relation between the technology subsidy and total abatement/emissions of a

country. Under an agreement on abatement, the agreement dictates national

abatements levels (and hence the national emissions levels as BAU emissions

are constant). With tradable emission quotas, national emissions follow solely

from the choice of abatement. Because the technology subsidy is determined in

the same way in the two cases, the subsidy is equal under the two types of

agreements.

18

6 A harmonized domestic carbon tax

In the previous section we discussed the case of an agreement with direct limits

on national emissions. In this section we analyze an agreement that does not

specify emission levels for the participating countries. Instead, the agreement

specifies policy instruments that the countries must implement domestically.

Below we study the case where there is a common domestic carbon tax τ that

all countries must implement. We assume that in each country the carbon tax

revenue of the government is redistributed domestically.

In the previous case, total emissions (aggregated over all participating

countries) followed directly from the agreement. In the present case, we

assume that each country determines abatement taking into account

environmental costs of emissions. For each country, environmental damage D

depends on the sum of total emissions ( (1 ) ( 1) (1 *))D m a n m a− + − − , where the

damage function is increasing and convex.

The domestic country now minimizes

*[ ( , ) ] ( (1 ) ( 1) (1 ))m c a y x D m a n m a+ + − + − − (27)

with respect to the technology subsidy σ and the fact that cost of carbon is τ

for all firms. The last restriction implies that at the firm level abatement follows

from

( , )ac a y τ= (28)

The first order condition with respect to the subsidy is

19

( ) ( ) 0ya yD c hτσ σ

∂ ∂′− + + =∂ ∂

(29)

where we have used (14) and (28).

From (5) and (29) we find that the equilibrium subsidy σ̂ now is given by

ˆ 1 ( )a

yh D σ

σ

σ τ∂∂∂∂

′= − − − (30)

Consider the last term in (30). Without any agreement this term would be zero:

the (domestic) tax rate would be equal to the marginal benefit of abatement D′ .

However, in the present case the common tax rate τ will in general be higher

than the tax rate the country would have chosen without any agreement. Both

derivatives aσ

∂∂

and yσ

∂∂

are positive, see the discussion after equations (8)-(11)

.The last term in (30) is therefore negative. Comparing with (24) it therefore

follows that σ̂ σ< .

We have thus shown the following:

Proposition 5: The equilibrium subsidy of R&D investments under a

harmonized domestic carbon tax is lower than the corresponding subsidy under

an agreement on abatement/tradable emission quotas.

The interpretation of this result is directly linked to the first term in (29). The

common tax rate τ will in general be higher than the tax rate the country

would have chosen without any agreement. Hence, the level of abatement is

20

distorted away from the country’s ideal choice. Because the term ( )Dτ ′− is

positive, and since increased R&D increases abatement, increased R&D also

increases this distortion. This gives each country a smaller incentive to

subsidize R&D investments than when such investments have no effect on the

countries’ abatement levels.

7 The second-best optimal price of carbon

So far, we have considered different types of agreements, without saying

anything about how abatement levels are determined. We have shown that

whatever the abatement level and tax rate is, the equilibrium subsidy of R&D

investments is lower in a tax agreement than in a quota agreement. Moreover,

under both types of agreements the equilibrium subsidies are lower than in the

first-best optimum. In this section we shall investigate whether this property of

both agreements should affect what the optimal quota/tax should be in the two

types of agreements. Whatever the type of agreement, we assume that the

agreement is designed (by the group of signatories) in order to minimize total

social costs aggregated over all identical firms, that is,

[ ( , ) ] ( (1 ))mn c a y x nD mn a+ + − (31)

is minimized. Let us first consider the first best optimum, that is, (31) is

minimized with respect to abatement a and x, subject to (18). The first order

condition is, in addition to (19)

ac nD′= (32)

which is the standard requirement that marginal costs of abatement should

equal total marginal benefit of abatement. Hence, from a first best perspective

the price of carbon in an agreement should equal total marginal benefits of

abatement nD′ .

21

According to Propositions 3 and 5, the subsidies under both types of second-

best agreements (since R&D subsidies are not included in the agreement) are

lower than the subsidy in the first best case (assuming positive technology

spillovers across countries). Should the second-best agreement therefore be

designed so that the price of carbon is higher than the optimal tax in the first

best optimum (to adjust for the difference in the R&D subsidy)? To answer

this, we must consider the two types of agreements separately.

Consider first the quota agreement. In this case the common technology level

in all countries is determined by (23), which give y as an increasing function of

a: y=y(a). In the minimization of (31) with respect to a we must now take into

account that y=y(a) and x=Hy(a) (from (18)). Instead of (32) we therefore now

get

( ) '( )a yc nD c H y a nD′ ′= − + > (33)

where the inequality sign follows from 0y′ > and (for γ*>0)

0y yc H c h+ < + = (from (23)). We thus have the following proposition:

Proposition 6: In an optimally designed quota agreement of the type discussed

in Sections 4 and 5, the abatement level is set so that the price of carbon (i.e.,

the marginal abatement cost) exceeds the sum of the marginal environmental

costs.

We next turn to the case of a tax agreement of the type discussed in Section 6.

In this case the abatement level is endogenously determined in each country by

equation (28). We can write this as ( , )a a y τ= where τ is considered as

exogenous by each country, while each country chooses its level of y (which in

equilibrium will be the same for all countries) through its choice of the subsidy

rate σ. From the properties of the abatement cost function it follows that

22

( , )a a y τ= is increasing in both arguments. The first order condition (29) may

be rewritten as

( , )( ) ( ) 0ya yD c h

yττ ∂′− + + =

∂ (34)

The optimal value of y (and therefore also the subsidy rate σ) will obviously

depend on the common tax rate τ. We saw above that when the agreement

directly specified the abatement level, y was larger the larger was a. We might

therefore expect that in the present case y is increasing in τ. This is, however,

not necessarily the case. In Appendix 1 we show the following:

Proposition 7: The equilibrium level of R&D investments under a harmonized

domestic carbon tax is lower the higher is the tax rate if 2 ( , ) 0a yy

ττ

∂>

∂ ∂. If D’’=0,

2 ( , ) 0a yy

ττ

∂<

∂ ∂is a necessary and sufficient condition for the equilibrium level of

R&D investments to be increasing in the tax rate.

From this proposition it is clear that y may very well be lower the higher is τ:

The term 2 ( , )a yy

ττ

∂∂ ∂

is positive if the rightward shift, measured horizontally, in

the marginal abatement cost curve is larger the higher up on this curve we are

initially. 10 This seems to be more plausible than the opposite case. We should

therefore expect less R&D investments the higher is the common tax rate.

10 It is easily verified that the sign of the term

2 ( , )a yy

ττ

∂∂ ∂

is identical to the sign of ay aaa aa aayc c c c− .

Note that 2 ( , ) 0a yy

ττ

∂>

∂ ∂ for e.g. ( , )c a y Ka yα β−= , where we must have 1 0α β> + > in order

to meet the imposed properties on the cost function (see Section 2).

23

Notice also that if R&D investments are reduced as a response to a higher tax,

the subsidy rate must also be lower the higher is the tax. This follows

immediately from

equations (8)-(11) and the discussion after these. If the common tax rate goes

up, and as a response to this all countries either leave their R&D subsidies

unchanged or increase their subsidies, both abatement and technology levels

will increase in all countries. A higher technology level in all countries requires

increased R&D in all countries, which contradicts that R&D investments are

reduced as a response to a higher tax.

The reason why countries might respond to an increased common carbon tax

by reducing their R&D subsidies is related to with the discussion after

Proposition 5: A higher common carbon tax increases each country’s distortion

of its abatement level away from its ideal choice. Reducing R&D subsidies

reduces abatement (cet. par.), and therefore mitigates this increased distortion.

For an optimal quota agreement, the marginal abatement cost was higher than

the sum of marginal environmental costs. The reason for this was that higher

abatement gave more R&D investments. For a tax agreement we should

therefore expect that if a higher tax gives lower abatement, the optimal tax

should be lower than the sum of marginal environmental costs. This is indeed

the case. The optimal tax is found by minimizing (31) with respect to τ after

inserting ( , )a a y τ= and ( )y y τ= and x=Hy(τ).11 The first order condition is

( , ) ( , ) ( ) ( )( ) ( ) 0ya y a y dy dynD c H

y d dτ τ τ ττ

τ τ τ ∂ ∂′− + + + = ∂ ∂

(35)

11 Note that (31) does not distinguish between domestic and foreign firms. We can use this expression because with a common price of carbon the response to a change in an instrument does not differ between domestic and foreign firms.

24

where we have used (28). Combining this with (34) gives, after some

straightforward derivations

( , )( 1)( )( ) ( , )

a yn D h HdyynD a y d

τττ τ τ

τ

∂′− + −∂′− =

∂∂

(36)

Since ( , )a a y τ= is increasing in its arguments and H<h, the large fraction is

positive. ( )nDτ ′− must therefore have the same sign as ( )dyd

ττ

. Combining this

result with Proposition 7 therefore gives the following Proposition:

Proposition 8: In an optimally designed tax agreement of the type discussed in

Section 6, the common emission tax (equal to the marginal abatement cost) is

lower than the sum of the marginal environmental costs if 2 ( , ) 0a yy

ττ

∂>

∂ ∂. If

D’’=0, 2 ( , ) 0a yy

ττ

∂<

∂ ∂is a necessary and sufficient condition for the optimal

common emission tax to be higher than the sum of the marginal environmental

costs.

8 Second best abatement and technology levels

In the previous section we found the optimal price of carbon under a quota

agreement and under a harmonized domestic carbon tax. We showed that under

a quota agreement the price of carbon should exceed the sum of the marginal

environmental costs, that is, the Pigovian level. On the other hand, with a

harmonized carbon tax the price of carbon should be lower than the Pigovian

level (provided 2 ( , ) 0a yy

ττ

∂>

∂ ∂). In this section we compare abatement and

25

technology levels in the two types of agreement, and also compare these with

the first-best social optimum.

From Proposition 5 we know that the equilibrium subsidy of R&D investments

under a harmonized domestic carbon tax is lower than the corresponding

subsidy under an agreement on tradable emission quotas. Moreover, it follows

from Proposition 6 and 8 that the price of carbon is lower under a harmonized

domestic carbon tax than under an agreement on tradable emission quotas

(provided 2 ( , ) 0a yy

ττ

∂>

∂ ∂). Because both abatement and technology level are

increasing in the technology subsidy and the price of carbon, see the discussion

after equations (8)-(11), we have demonstrated the following:

Proposition 9: Suppose that 2 ( , ) 0a yy

ττ

∂>

∂ ∂. Then abatement and technology

level are lower under a harmonized domestic carbon tax than under an

agreement on tradable emission quotas. In addition, R&D investments are

lower under a harmonized domestic carbon tax than under an agreement on

tradable emission quotas.

Note that the last part of Proposition 9 follows directly from the first part

because lower technology level in all firms implies lower R&D investments in

all (identical) firms.

We now compare the outcome of the international agreements with the first-

best social optimum. Proposition 3 and 5 imply that the equilibrium subsidy of

R&D investments under a harmonized domestic carbon tax is lower than the

first-best optimal subsidy. Moreover, from Proposition 8 we know that the

price of carbon under a harmonized domestic carbon tax is lower than the first-

best price of carbon (the Pigovian level), provided that 2 ( , ) 0a yy

ττ

∂>

∂ ∂. Because

26

both abatement and technology level are increasing in the technology subsidy

and the price of carbon, we have demonstrated the following:

Proposition 10: Suppose that 2 ( , ) 0a yy

ττ

∂>

∂ ∂. Then abatement and technology

level are lower under a harmonized domestic carbon tax than in the first-best

social optimum. In addition, R&D investments are lower under a harmonized

domestic carbon tax than in the first-best social optimum.

As mentioned above, we have showed that under a quota agreement the price

of carbon should exceed the Pigovian level, see Proposition 6. Moreover, from

Proposition 3 we know that the equilibrium subsidy under quotas is lower than

in the first-best optimum (provided there are technology spillovers across

countries). Because both abatement and technology level are increasing in the

technology subsidy and the price of carbon, it is not obvious how abatement

and technology levels are in the optimal quota agreement compared with the

first-best levels. In Appendix 2 we show the following:

Proposition 11: If international technology spillovers are positive but

sufficiently small, technology levels, and thus also R&D investments, are lower

under a quota agreement than in the first-best optimum. The abatement level in

the quota agreement can be either lower or higher than in the first-best

optimum.

9 Social costs of second-best climate agreements

In the previous two sections, we have compared the two types of international

agreements, provided both are (second-best) optimally designed. We also

compared both types of agreements with the first-best optimum. Obviously,

both types of second-best climate agreements give higher social costs than the

first-best outcome. We have, however, not yet discussed which of the two types

27

of second-best agreements give the lowest total costs. Given the results in the

two previous sections, the comparison of total costs is easily illustrated by

Figure 1.

Figure 1

In this Figure, the iso-welfare curves stand for the negative of total costs. The

highest obtainable welfare (i.e. lowest possible costs) is given by the common

abatement and technology level corresponding to F(irst best) in Figure 1.The

curve (19) is given by equation (19): It tells us which technology level

maximizes social welfare given any abatement level. Clearly, this curve must

go through all vertical tangents to the iso-welfare curves. Moving outwards

along (19) in the northeast direction is like hiking along a ridge that drops off

directly north and directly south. The position of this ridge is independent of

the environmental damage function D. However, the position of the summit

(given by F in Figure 1), and also the steepness along the ridge to both sides of

the summit, depend on the function D as F is determined by (19) and (32).

y

a

(23)

(19)

(29)

Q

T

F ▪

▪ ▪

28

Consider next a quota agreement. The relationship between abatement and

technology level for such an agreement is given by equation (23). Since h>H

when there are international technology spillovers, the line defined by (23)

must lie below the line defined by (19). The highest possible social welfare

obtainable given that we must lie on (23) is given by the point Q(uota) in

Figure 1, and must obviously give a lower welfare level than the point F. We

have drawn the curves so that Q lies below F, which must be the case if

international spillovers are sufficiently low (cf. Proposition 11). In the Figure,

Q lies to the right of F, but it follows from Proposition 11 that the opposite is

also possible.

Finally, consider a tax agreement. The relationship between abatement and

technology level for such an agreement is given by equation (29), which may

be rewritten as

( )y

a

c h D yστ

σ

∂∂′− = + −∂∂

The right-hand side is larger than h, cf. the discussion after (30). It follows that

the line defined by (29) must lie below the line defined by (29). 12 The highest

possible social welfare obtainable given that we must lie on (29) is given by the

point T(ax) in Figure 1, and must obviously give a lower welfare level than the

point Q. We have drawn the curves so that T lies below and to the left of F and

Q, which must be the case if 2 ( , ) 0a yy

ττ

∂>

∂ ∂ (cf. Propositions 9 and 10).

To summarize, we have shown the following:

12 Notice that while the curves defined by (19) and (23) for certain are rising in Figure 1, this is not obvious for the curve defined by (29).

29

Proposition 12: If there are international technology spillovers, total social

costs are higher under an optimally designed tax agreement of the type

discussed in Section 6 than they are under an optimally designed quota

agreement of the type discussed in Sections 4 and 5. Both types of agreements

have higher total social costs than the first-best outcome.

10 Concluding remarks

We have studied two types of international climate agreements that do not

include R&D policies. Without international technology spillovers, these

agreements would be equivalent, and both could give the first-best outcome. In

the presence of international technology spillovers, it is not possible to reach

the first-best outcome with either of these agreements. One reason is that the

R&D subsidies that are optimal for an individual country under an agreement

are too low compared with the subsidies that must be imposed in order to reach

the first-best outcome.

Although both types of agreements are inferior compared with the first-best

outcome, under an optimally designed quota agreement global emissions may

be lower than in the first-best outcome. Under an optimally designed tax

agreement, emissions are – under a reasonable assumption - higher than under

a quota agreement and higher than in the first-best outcome.

We concluded that with optimally designed agreements a quota agreement was

preferable to a tax agreement as the first gives lower social costs. Compared

with the tax agreement, the quota agreement has higher R&D subsidies and

(under a reasonable assumption) higher abatement.

Our results suggest that with international spillovers, there is a social loss of

not including R&D policies in an international climate agreement. In the

Introduction, we argued that one reason for not including R&D policies in an

30

agreement is difficulties in monitoring compliance of this element of an

agreement. However, even if it is difficult or impossible to design a first-best

type of agreement, our results suggest that agreements where R&D policies are

included in an imperfect manner may be superior to agreements that ignore

R&D policies. Moreover, the implicit assumption in our model that there are no

problems with monitoring and/or compliance with respect to policy instruments

and emissions is obviously also a simplification. Some economists, including

Barrett (2003), have argued that traditional agreements of the quota type

discussed in the present paper are inherently flawed, due to large free rider

incentives. Barrett argues (op.cit, chapter 15) that agreements that to a larger

degree focus on the development of new technology might be more likely to be

successful than traditional quota type agreements.13

An interesting topic for future research would be to examine various types of

agreements that include R&D policies under imperfect monitoring or

incomplete compliance. In such a study it is important how the development of

new technology is modeled. While we in the present paper have used the

standard assumption of additive spillovers, a more sophisticated modeling

would be to e.g. assume that for each firm spillovers from other firms have

“decreasing returns” or that for each firm the benefits of R&D investments in

other firms depend on the magnitude of its own R&D investments. The

implications of different technology assumptions will be investigated in future

research.

Appendix 1: The relationship between R&D investment and the common

carbon tax rate

Denote the left hand side of (34) by ( ( , ))L L y τ= . We have

13 Cf. also the discussion of Buchner and Carraro (2004) in the Introduction.

31

( )L

dyLdy

τ ττ

∂−

∂=∂∂

(37)

The denominator of this expression is positive from the second order

conditions.

Remembering that the environmental cost is ( (1 ) ( 1) (1 *))D m a n m a− + − − , it

follows from (34) that

( ) ( )2 *,( , ) ( , ) ( , )( ') 1 '' 1 '' ya

a yL a y da a y a yD mD n mD cy d y

ττ τ τττ τ τ τ τ

∂ ∂ ∂ ∂ ∂= − + + + − + ∂ ∂ ∂ ∂ ∂ ∂

(38)

The effect of a tax change on abatement in other countries is identical to the

effect on abatement of the country we are considering, i.e. the sum of the direct

effect and the effect via the technology level:

( ) ( ) ( )* , ,a y a y dydad y d

τ τ ττ τ τ

∂ ∂= +

∂ ∂ (39)

We can therefore rewrite (38) as (simplifying by writing a instead of ( , )a y τ ):

( ) ( ) ( )2

' '' 1 ya

dyL a a a a a aD mD n n cy y d y y

ττ

τ τ τ τ τ ∂ ∂ ∂ ∂ ∂ ∂ ∂

= − + + − + + ∂ ∂ ∂ ∂ ∂ ∂ ∂ ∂ (40)

From (28) we have

32

ay

aa

cay c

−∂=

∂ and 1

aa

acτ

∂=

∂, which imply that the second term in square brackets

in (40) is zero. Using (38) we therefore have

( ) ( ) ( )221 ' '' 1 ''

dy a a a a dyD nmD n mDLd y y y dy

ττ

τ τ τ τ

∂ ∂ ∂ ∂= − − − − − ∂ ∂ ∂ ∂ ∂ ∂

∂

(41)

or

( ) ( )2 2

1 '' ' ''L a dy a a an mD D nmDy y d y y

ττ τ τ

∂ ∂ ∂ ∂ ∂+ − = − − − ∂ ∂ ∂ ∂ ∂ ∂

(42)

Since the term in square brackets is positive, 'Dτ > , and ( , )a y τ is increasing in

both arguments, Proposition 7 immediately follows.

Appendix 2: Proof of Proposition 11

We know that if h=H, which will be the case if there are no international

spillovers, the optimal quota agreement is identical to the first-best optimum. If

we can identify in what direction abatement and technology levels change as h

is increased (h>H when there are international spillovers), we therefore know

how the quota agreement differs from the first-best optimum when there are

international spillovers.14

The optimal quota agreement is given by (23) and (33). Combining these we

obtain

( , ) '( (1 )) ( ) ( , )ac a y nD mn a h H a yφ= − + − (43)

14 An increase in h, while keeping H unchanged, is accomplished through a suitable increase in *γ and a suitable decrease in γ .

33

where

( , )

( , ) '( ) 0( , )

ay

yy

c a ya y y a

c a yφ = = >

− (44)

Differentiating (23) and (43) w.r.t. h we find (using (44))

1 ( ) ya h Hh D

φ∂= −

∂ (45)

( )2 21 1'' ( )aa yy ay ayy

y n m D c c c h Hh D c

φ ∂

= − − − + − ∂

(46)

where

2 2( ) '' ( )( )aa yy ay yy y ay a yyD c c c mn D c h H c cφ φ= − + + − − (47)

The first two terms in D are positive, and will dominate the last term as long as

h-H is sufficiently small. From (46) and our assumptions on the functions D

and c it is therefore clear that as h increases, y will decline. This will be true at

least for h close to H (but might also hold when h-H is large). As long as the

international spillovers are sufficiently small, h-H will be small, so we can

conclude that in this case the technology levels y are lower in the quota

agreement than in the first-best optimum. Moreover, it follows directly from

(45) that since we do not generally know the sign of yφ , we do not know

whether abatement levels under the quota agreement are lower or higher than in

the first-best optimum. This concludes the proof of Proposition 11.

34

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Mechanisms to Procure Multiple Contracts PRIV 29.2003 TangaMcDANIEL and Karsten NEUHOFF (lx): Use of Long-term Auctions for Network Investment PRIV 30.2003 Emiel MAASLAND and Sander ONDERSTAL (lx): Auctions with Financial Externalities ETA 31.2003 Michael FINUS and Bianca RUNDSHAGEN: A Non-cooperative Foundation of Core-Stability in Positive

Externality NTU-Coalition Games KNOW 32.2003 Michele MORETTO: Competition and Irreversible Investments under Uncertainty_ PRIV 33.2003 Philippe QUIRION: Relative Quotas: Correct Answer to Uncertainty or Case of Regulatory Capture? KNOW 34.2003 Giuseppe MEDA, Claudio PIGA and Donald SIEGEL: On the Relationship between R&D and Productivity: A

Treatment Effect Analysis ETA 35.2003 Alessandra DEL BOCA, Marzio GALEOTTI and Paola ROTA: Non-convexities in the Adjustment of Different

Capital Inputs: A Firm-level Investigation

GG 36.2003 Matthieu GLACHANT: Voluntary Agreements under Endogenous Legislative Threats PRIV 37.2003 Narjess BOUBAKRI, Jean-Claude COSSET and Omrane GUEDHAMI: Postprivatization Corporate

Governance: the Role of Ownership Structure and Investor Protection CLIM 38.2003 Rolf GOLOMBEK and Michael HOEL: Climate Policy under Technology Spillovers KNOW 39.2003 Slim BEN YOUSSEF: Transboundary Pollution, R&D Spillovers and International Trade CTN 40.2003 Carlo CARRARO and Carmen MARCHIORI: Endogenous Strategic Issue Linkage in International Negotiations KNOW 41.2003 Sonia OREFFICE: Abortion and Female Power in the Household: Evidence from Labor Supply KNOW 42.2003 Timo GOESCHL and Timothy SWANSON: On Biology and Technology: The Economics of Managing

Biotechnologies ETA 43.2003 Giorgio BUSETTI and Matteo MANERA: STAR-GARCH Models for Stock Market Interactions in the Pacific

Basin Region, Japan and US CLIM 44.2003 Katrin MILLOCK and Céline NAUGES: The French Tax on Air Pollution: Some Preliminary Results on its

Effectiveness PRIV 45.2003 Bernardo BORTOLOTTI and Paolo PINOTTI: The Political Economy of Privatization SIEV 46.2003 Elbert DIJKGRAAF and Herman R.J. VOLLEBERGH: Burn or Bury? A Social Cost Comparison of Final Waste

Disposal Methods ETA 47.2003 Jens HORBACH: Employment and Innovations in the Environmental Sector: Determinants and Econometrical

Results for Germany CLIM 48.2003 Lori SNYDER, Nolan MILLER and Robert STAVINS: The Effects of Environmental Regulation on Technology

Diffusion: The Case of Chlorine Manufacturing CLIM 49.2003 Lori SNYDER, Robert STAVINS and Alexander F. WAGNER: Private Options to Use Public Goods. Exploiting

Revealed Preferences to Estimate Environmental Benefits CTN 50.2003 László Á. KÓCZY and Luc LAUWERS (lxi): The Minimal Dominant Set is a Non-Empty Core-Extension

CTN 51.2003 Matthew O. JACKSON (lxi):Allocation Rules for Network Games CTN 52.2003 Ana MAULEON and Vincent VANNETELBOSCH (lxi): Farsightedness and Cautiousness in Coalition FormationCTN 53.2003 Fernando VEGA-REDONDO (lxi): Building Up Social Capital in a Changing World: a network approach CTN 54.2003 Matthew HAAG and Roger LAGUNOFF (lxi): On the Size and Structure of Group Cooperation CTN 55.2003 Taiji FURUSAWA and Hideo KONISHI (lxi): Free Trade Networks CTN 56.2003 Halis Murat YILDIZ (lxi): National Versus International Mergers and Trade Liberalization CTN 57.2003 Santiago RUBIO and Alistair ULPH (lxi): An Infinite-Horizon Model of Dynamic Membership of International

Environmental Agreements KNOW 58.2003 Carole MAIGNAN, Dino PINELLI and Gianmarco I.P. OTTAVIANO: ICT, Clusters and Regional Cohesion: A

Summary of Theoretical and Empirical Research KNOW 59.2003 Giorgio BELLETTINI and Gianmarco I.P. OTTAVIANO: Special Interests and Technological Change ETA 60.2003 Ronnie SCHÖB: The Double Dividend Hypothesis of Environmental Taxes: A Survey CLIM 61.2003 Michael FINUS, Ekko van IERLAND and Robert DELLINK: Stability of Climate Coalitions in a Cartel

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International Environmental Agreements SIEV 63.2003 Alberto PETRUCCI: Taxing Land Rent in an Open Economy CLIM 64.2003 Joseph E. ALDY, Scott BARRETT and Robert N. STAVINS: Thirteen Plus One: A Comparison of Global Climate

Policy Architectures SIEV 65.2003 Edi DEFRANCESCO: The Beginning of Organic Fish Farming in Italy SIEV 66.2003 Klaus CONRAD: Price Competition and Product Differentiation when Consumers Care for the Environment SIEV 67.2003 Paulo A.L.D. NUNES, Luca ROSSETTO, Arianne DE BLAEIJ: Monetary Value Assessment of Clam Fishing

Management Practices in the Venice Lagoon: Results from a Stated Choice Exercise CLIM 68.2003 ZhongXiang ZHANG: Open Trade with the U.S. Without Compromising Canada’s Ability to Comply with its

Kyoto Target KNOW 69.2003 David FRANTZ (lix): Lorenzo Market between Diversity and Mutation KNOW 70.2003 Ercole SORI (lix): Mapping Diversity in Social History KNOW 71.2003 Ljiljana DERU SIMIC (lxii): What is Specific about Art/Cultural Projects? KNOW 72.2003 Natalya V. TARANOVA (lxii):The Role of the City in Fostering Intergroup Communication in a Multicultural

Environment: Saint-Petersburg’s Case KNOW 73.2003 Kristine CRANE (lxii): The City as an Arena for the Expression of Multiple Identities in the Age of

Globalisation and Migration KNOW 74.2003 Kazuma MATOBA (lxii): Glocal Dialogue- Transformation through Transcultural Communication KNOW 75.2003 Catarina REIS OLIVEIRA (lxii): Immigrants’ Entrepreneurial Opportunities: The Case of the Chinese in

Portugal KNOW 76.2003 Sandra WALLMAN (lxii): The Diversity of Diversity - towards a typology of urban systems KNOW 77.2003 Richard PEARCE (lxii): A Biologist’s View of Individual Cultural Identity for the Study of Cities KNOW 78.2003 Vincent MERK (lxii): Communication Across Cultures: from Cultural Awareness to Reconciliation of the

Dilemmas KNOW 79.2003 Giorgio BELLETTINI, Carlotta BERTI CERONI and Gianmarco I.P.OTTAVIANO: Child Labor and Resistance

to Change ETA 80.2003 Michele MORETTO, Paolo M. PANTEGHINI and Carlo SCARPA: Investment Size and Firm’s Value under

Profit Sharing Regulation

IEM 81.2003 Alessandro LANZA, Matteo MANERA and Massimo GIOVANNINI: Oil and Product Dynamics in International Petroleum Markets

CLIM 82.2003 Y. Hossein FARZIN and Jinhua ZHAO: Pollution Abatement Investment When Firms Lobby Against Environmental Regulation

CLIM 83.2003 Giuseppe DI VITA: Is the Discount Rate Relevant in Explaining the Environmental Kuznets Curve? CLIM 84.2003 Reyer GERLAGH and Wietze LISE: Induced Technological Change Under Carbon Taxes NRM 85.2003 Rinaldo BRAU, Alessandro LANZA and Francesco PIGLIARU: How Fast are the Tourism Countries Growing?

The cross-country evidence KNOW 86.2003 Elena BELLINI, Gianmarco I.P. OTTAVIANO and Dino PINELLI: The ICT Revolution: opportunities and risks

for the Mezzogiorno SIEV 87.2003 Lucas BRETSCGHER and Sjak SMULDERS: Sustainability and Substitution of Exhaustible Natural Resources.

How resource prices affect long-term R&D investments CLIM 88.2003 Johan EYCKMANS and Michael FINUS: New Roads to International Environmental Agreements: The Case of

Global Warming CLIM 89.2003 Marzio GALEOTTI: Economic Development and Environmental Protection CLIM 90.2003 Marzio GALEOTTI: Environment and Economic Growth: Is Technical Change the Key to Decoupling? CLIM 91.2003 Marzio GALEOTTI and Barbara BUCHNER: Climate Policy and Economic Growth in Developing Countries IEM 92.2003 A. MARKANDYA, A. GOLUB and E. STRUKOVA: The Influence of Climate Change Considerations on Energy

Policy: The Case of Russia ETA 93.2003 Andrea BELTRATTI: Socially Responsible Investment in General Equilibrium CTN 94.2003 Parkash CHANDER: The γ-Core and Coalition Formation IEM 95.2003 Matteo MANERA and Angelo MARZULLO: Modelling the Load Curve of Aggregate Electricity Consumption

Using Principal Components IEM 96.2003 Alessandro LANZA, Matteo MANERA, Margherita GRASSO and Massimo GIOVANNINI: Long-run Models of

Oil Stock Prices CTN 97.2003 Steven J. BRAMS, Michael A. JONES, and D. Marc KILGOUR: Forming Stable Coalitions: The Process

Matters KNOW 98.2003 John CROWLEY, Marie-Cecile NAVES (lxiii): Anti-Racist Policies in France. From Ideological and Historical

Schemes to Socio-Political Realities KNOW 99.2003 Richard THOMPSON FORD (lxiii): Cultural Rights and Civic Virtue KNOW 100.2003 Alaknanda PATEL (lxiii): Cultural Diversity and Conflict in Multicultural Cities KNOW 101.2003 David MAY (lxiii): The Struggle of Becoming Established in a Deprived Inner-City Neighbourhood KNOW 102.2003 Sébastien ARCAND, Danielle JUTEAU, Sirma BILGE, and Francine LEMIRE (lxiii) : Municipal Reform on the

Island of Montreal: Tensions Between Two Majority Groups in a Multicultural City CLIM 103.2003 Barbara BUCHNER and Carlo CARRARO: China and the Evolution of the Present Climate Regime CLIM 104.2003 Barbara BUCHNER and Carlo CARRARO: Emissions Trading Regimes and Incentives to Participate in

International Climate Agreements CLIM 105.2003 Anil MARKANDYA and Dirk T.G. RÜBBELKE: Ancillary Benefits of Climate Policy NRM 106.2003 Anne Sophie CRÉPIN (lxiv): Management Challenges for Multiple-Species Boreal Forests NRM 107.2003 Anne Sophie CRÉPIN (lxiv): Threshold Effects in Coral Reef Fisheries SIEV 108.2003 Sara ANIYAR ( lxiv): Estimating the Value of Oil Capital in a Small Open Economy: The Venezuela’s Example SIEV 109.2003 Kenneth ARROW, Partha DASGUPTA and Karl-Göran MÄLER(lxiv): Evaluating Projects and Assessing

Sustainable Development in Imperfect Economies NRM 110.2003 Anastasios XEPAPADEAS and Catarina ROSETA-PALMA(lxiv): Instabilities and Robust Control in Fisheries NRM 111.2003 Charles PERRINGS and Brian WALKER (lxiv): Conservation and Optimal Use of Rangelands ETA 112.2003 Jack GOODY (lxiv): Globalisation, Population and Ecology CTN 113.2003 Carlo CARRARO, Carmen MARCHIORI and Sonia OREFFICE: Endogenous Minimum Participation in

International Environmental Treaties CTN 114.2003 Guillaume HAERINGER and Myrna WOODERS: Decentralized Job Matching CTN 115.2003 Hideo KONISHI and M. Utku UNVER: Credible Group Stability in Multi-Partner Matching Problems CTN 116.2003 Somdeb LAHIRI: Stable Matchings for the Room-Mates Problem CTN 117.2003 Somdeb LAHIRI: Stable Matchings for a Generalized Marriage Problem CTN 118.2003 Marita LAUKKANEN: Transboundary Fisheries Management under Implementation Uncertainty CTN 119.2003 Edward CARTWRIGHT and Myrna WOODERS: Social Conformity and Bounded Rationality in Arbitrary

Games with Incomplete Information: Some First Results CTN 120.2003 Gianluigi VERNASCA: Dynamic Price Competition with Price Adjustment Costs and Product Differentiation CTN 121.2003 Myrna WOODERS, Edward CARTWRIGHT and Reinhard SELTEN: Social Conformity in Games with Many

Players CTN 122.2003 Edward CARTWRIGHT and Myrna WOODERS: On Equilibrium in Pure Strategies in Games with Many PlayersCTN 123.2003 Edward CARTWRIGHT and Myrna WOODERS: Conformity and Bounded Rationality in Games with Many

Players 1000 Carlo CARRARO, Alessandro LANZA and Valeria PAPPONETTI: One Thousand Working Papers

NOTE DI LAVORO PUBLISHED IN 2004

IEM 1.2004 Anil MARKANDYA, Suzette PEDROSO and Alexander GOLUB: Empirical Analysis of National Income and

So2 Emissions in Selected European Countries

ETA 2.2004 Masahisa FUJITA and Shlomo WEBER: Strategic Immigration Policies and Welfare in Heterogeneous CountriesPRA 3.2004 Adolfo DI CARLUCCIO, Giovanni FERRI, Cecilia FRALE and Ottavio RICCHI: Do Privatizations Boost

Household Shareholding? Evidence from Italy ETA 4.2004 Victor GINSBURGH and Shlomo WEBER: Languages Disenfranchisement in the European Union ETA 5.2004 Romano PIRAS: Growth, Congestion of Public Goods, and Second-Best Optimal Policy CCMP 6.2004 Herman R.J. VOLLEBERGH: Lessons from the Polder: Is Dutch CO2-Taxation Optimal PRA 7.2004 Sandro BRUSCO, Giuseppe LOPOMO and S. VISWANATHAN (lxv): Merger Mechanisms PRA 8.2004 Wolfgang AUSSENEGG, Pegaret PICHLER and Alex STOMPER (lxv): IPO Pricing with Bookbuilding, and a

When-Issued Market PRA 9.2004 Pegaret PICHLER and Alex STOMPER (lxv): Primary Market Design: Direct Mechanisms and Markets PRA 10.2004 Florian ENGLMAIER, Pablo GUILLEN, Loreto LLORENTE, Sander ONDERSTAL and Rupert SAUSGRUBER

(lxv): The Chopstick Auction: A Study of the Exposure Problem in Multi-Unit Auctions PRA 11.2004 Bjarne BRENDSTRUP and Harry J. PAARSCH (lxv): Nonparametric Identification and Estimation of Multi-

Unit, Sequential, Oral, Ascending-Price Auctions With Asymmetric Bidders PRA 12.2004 Ohad KADAN (lxv): Equilibrium in the Two Player, k-Double Auction with Affiliated Private Values PRA 13.2004 Maarten C.W. JANSSEN (lxv): Auctions as Coordination Devices PRA 14.2004 Gadi FIBICH, Arieh GAVIOUS and Aner SELA (lxv): All-Pay Auctions with Weakly Risk-Averse Buyers PRA 15.2004 Orly SADE, Charles SCHNITZLEIN and Jaime F. ZENDER (lxv): Competition and Cooperation in Divisible

Good Auctions: An Experimental Examination PRA 16.2004 Marta STRYSZOWSKA (lxv): Late and Multiple Bidding in Competing Second Price Internet Auctions CCMP 17.2004 Slim Ben YOUSSEF: R&D in Cleaner Technology and International Trade NRM 18.2004 Angelo ANTOCI, Simone BORGHESI and Paolo RUSSU (lxvi): Biodiversity and Economic Growth:

Stabilization Versus Preservation of the Ecological Dynamics SIEV 19.2004 Anna ALBERINI, Paolo ROSATO, Alberto LONGO and Valentina ZANATTA: Information and Willingness to

Pay in a Contingent Valuation Study: The Value of S. Erasmo in the Lagoon of Venice NRM 20.2004 Guido CANDELA and Roberto CELLINI (lxvii): Investment in Tourism Market: A Dynamic Model of

Differentiated Oligopoly NRM 21.2004 Jacqueline M. HAMILTON (lxvii): Climate and the Destination Choice of German Tourists

NRM 22.2004 Javier Rey-MAQUIEIRA PALMER, Javier LOZANO IBÁÑEZ and Carlos Mario GÓMEZ GÓMEZ (lxvii): Land, Environmental Externalities and Tourism Development

NRM 23.2004 Pius ODUNGA and Henk FOLMER (lxvii): Profiling Tourists for Balanced Utilization of Tourism-Based Resources in Kenya

NRM 24.2004 Jean-Jacques NOWAK, Mondher SAHLI and Pasquale M. SGRO (lxvii):Tourism, Trade and Domestic Welfare NRM 25.2004 Riaz SHAREEF (lxvii): Country Risk Ratings of Small Island Tourism Economies NRM 26.2004 Juan Luis EUGENIO-MARTÍN, Noelia MARTÍN MORALES and Riccardo SCARPA (lxvii): Tourism and

Economic Growth in Latin American Countries: A Panel Data Approach NRM 27.2004 Raúl Hernández MARTÍN (lxvii): Impact of Tourism Consumption on GDP. The Role of Imports CSRM 28.2004 Nicoletta FERRO: Cross-Country Ethical Dilemmas in Business: A Descriptive Framework NRM 29.2004 Marian WEBER (lxvi): Assessing the Effectiveness of Tradable Landuse Rights for Biodiversity Conservation:

an Application to Canada's Boreal Mixedwood Forest NRM 30.2004 Trond BJORNDAL, Phoebe KOUNDOURI and Sean PASCOE (lxvi): Output Substitution in Multi-Species

Trawl Fisheries: Implications for Quota Setting CCMP 31.2004 Marzio GALEOTTI, Alessandra GORIA, Paolo MOMBRINI and Evi SPANTIDAKI: Weather Impacts on

Natural, Social and Economic Systems (WISE) Part I: Sectoral Analysis of Climate Impacts in Italy CCMP 32.2004 Marzio GALEOTTI, Alessandra GORIA ,Paolo MOMBRINI and Evi SPANTIDAKI: Weather Impacts on

Natural, Social and Economic Systems (WISE) Part II: Individual Perception of Climate Extremes in Italy CTN 33.2004 Wilson PEREZ: Divide and Conquer: Noisy Communication in Networks, Power, and Wealth Distribution KTHC 34.2004 Gianmarco I.P. OTTAVIANO and Giovanni PERI (lxviii): The Economic Value of Cultural Diversity: Evidence

from US Cities KTHC 35.2004 Linda CHAIB (lxviii): Immigration and Local Urban Participatory Democracy: A Boston-Paris Comparison KTHC 36.2004 Franca ECKERT COEN and Claudio ROSSI (lxviii): Foreigners, Immigrants, Host Cities: The Policies of

Multi-Ethnicity in Rome. Reading Governance in a Local Context KTHC 37.2004 Kristine CRANE (lxviii): Governing Migration: Immigrant Groups’ Strategies in Three Italian Cities – Rome,

Naples and Bari KTHC 38.2004 Kiflemariam HAMDE (lxviii): Mind in Africa, Body in Europe: The Struggle for Maintaining and Transforming

Cultural Identity - A Note from the Experience of Eritrean Immigrants in Stockholm ETA 39.2004 Alberto CAVALIERE: Price Competition with Information Disparities in a Vertically Differentiated Duopoly PRA 40.2004 Andrea BIGANO and Stef PROOST: The Opening of the European Electricity Market and Environmental Policy:

Does the Degree of Competition Matter? CCMP 41.2004 Micheal FINUS (lxix): International Cooperation to Resolve International Pollution Problems

KTHC 42.2004 Francesco CRESPI: Notes on the Determinants of Innovation: A Multi-Perspective Analysis CTN 43.2004 Sergio CURRARINI and Marco MARINI: Coalition Formation in Games without Synergies CTN 44.2004 Marc ESCRIHUELA-VILLAR: Cartel Sustainability and Cartel Stability NRM 45.2004 Sebastian BERVOETS and Nicolas GRAVEL (lxvi): Appraising Diversity with an Ordinal Notion of Similarity:

An Axiomatic Approach NRM 46.2004 Signe ANTHON and Bo JELLESMARK THORSEN (lxvi): Optimal Afforestation Contracts with Asymmetric

Information on Private Environmental Benefits NRM 47.2004 John MBURU (lxvi): Wildlife Conservation and Management in Kenya: Towards a Co-management Approach NRM 48.2004 Ekin BIROL, Ágnes GYOVAI and Melinda SMALE (lxvi): Using a Choice Experiment to Value Agricultural

Biodiversity on Hungarian Small Farms: Agri-Environmental Policies in a Transition al Economy CCMP 49.2004 Gernot KLEPPER and Sonja PETERSON: The EU Emissions Trading Scheme. Allowance Prices, Trade Flows,

Competitiveness Effects GG 50.2004 Scott BARRETT and Michael HOEL: Optimal Disease Eradication CTN 51.2004 Dinko DIMITROV, Peter BORM, Ruud HENDRICKX and Shao CHIN SUNG: Simple Priorities and Core

Stability in Hedonic Games SIEV 52.2004 Francesco RICCI: Channels of Transmission of Environmental Policy to Economic Growth: A Survey of the

Theory SIEV 53.2004 Anna ALBERINI, Maureen CROPPER, Alan KRUPNICK and Nathalie B. SIMON: Willingness to Pay for

Mortality Risk Reductions: Does Latency Matter? NRM 54.2004 Ingo BRÄUER and Rainer MARGGRAF (lxvi): Valuation of Ecosystem Services Provided by Biodiversity

Conservation: An Integrated Hydrological and Economic Model to Value the Enhanced Nitrogen Retention in Renaturated Streams

NRM 55.2004 Timo GOESCHL and Tun LIN (lxvi): Biodiversity Conservation on Private Lands: Information Problems and Regulatory Choices

NRM 56.2004 Tom DEDEURWAERDERE (lxvi): Bioprospection: From the Economics of Contracts to Reflexive Governance CCMP 57.2004 Katrin REHDANZ and David MADDISON: The Amenity Value of Climate to German Households CCMP 58.2004 Koen SMEKENS and Bob VAN DER ZWAAN: Environmental Externalities of Geological Carbon Sequestration

Effects on Energy Scenarios NRM 59.2004 Valentina BOSETTI, Mariaester CASSINELLI and Alessandro LANZA (lxvii): Using Data Envelopment

Analysis to Evaluate Environmentally Conscious Tourism Management NRM 60.2004 Timo GOESCHL and Danilo CAMARGO IGLIORI (lxvi):Property Rights Conservation and Development: An

Analysis of Extractive Reserves in the Brazilian Amazon CCMP 61.2004 Barbara BUCHNER and Carlo CARRARO: Economic and Environmental Effectiveness of a

Technology-based Climate Protocol NRM 62.2004 Elissaios PAPYRAKIS and Reyer GERLAGH: Resource-Abundance and Economic Growth in the U.S. NRM 63.2004 Györgyi BELA, György PATAKI, Melinda SMALE and Mariann HAJDÚ (lxvi): Conserving Crop Genetic

Resources on Smallholder Farms in Hungary: Institutional Analysis NRM 64.2004 E.C.M. RUIJGROK and E.E.M. NILLESEN (lxvi): The Socio-Economic Value of Natural Riverbanks in the

Netherlands NRM 65.2004 E.C.M. RUIJGROK (lxvi): Reducing Acidification: The Benefits of Increased Nature Quality. Investigating the

Possibilities of the Contingent Valuation Method ETA 66.2004 Giannis VARDAS and Anastasios XEPAPADEAS: Uncertainty Aversion, Robust Control and Asset Holdings GG 67.2004 Anastasios XEPAPADEAS and Constadina PASSA: Participation in and Compliance with Public Voluntary

Environmental Programs: An Evolutionary Approach GG 68.2004 Michael FINUS: Modesty Pays: Sometimes! NRM 69.2004 Trond BJØRNDAL and Ana BRASÃO: The Northern Atlantic Bluefin Tuna Fisheries: Management and Policy

Implications CTN 70.2004 Alejandro CAPARRÓS, Abdelhakim HAMMOUDI and Tarik TAZDAÏT: On Coalition Formation with

Heterogeneous Agents IEM 71.2004 Massimo GIOVANNINI, Margherita GRASSO, Alessandro LANZA and Matteo MANERA: Conditional

Correlations in the Returns on Oil Companies Stock Prices and Their Determinants IEM 72.2004 Alessandro LANZA, Matteo MANERA and Michael MCALEER: Modelling Dynamic Conditional Correlations

in WTI Oil Forward and Futures Returns SIEV 73.2004 Margarita GENIUS and Elisabetta STRAZZERA: The Copula Approach to Sample Selection Modelling:

An Application to the Recreational Value of Forests CCMP 74.2004 Rob DELLINK and Ekko van IERLAND: Pollution Abatement in the Netherlands: A Dynamic Applied General

Equilibrium Assessment ETA 75.2004 Rosella LEVAGGI and Michele MORETTO: Investment in Hospital Care Technology under Different

Purchasing Rules: A Real Option Approach CTN 76.2004 Salvador BARBERÀ and Matthew O. JACKSON (lxx): On the Weights of Nations: Assigning Voting Weights in

a Heterogeneous Union CTN 77.2004 Àlex ARENAS, Antonio CABRALES, Albert DÍAZ-GUILERA, Roger GUIMERÀ and Fernando VEGA-

REDONDO (lxx): Optimal Information Transmission in Organizations: Search and Congestion CTN 78.2004 Francis BLOCH and Armando GOMES (lxx): Contracting with Externalities and Outside Options

CTN 79.2004 Rabah AMIR, Effrosyni DIAMANTOUDI and Licun XUE (lxx): Merger Performance under Uncertain Efficiency Gains

CTN 80.2004 Francis BLOCH and Matthew O. JACKSON (lxx): The Formation of Networks with Transfers among Players CTN 81.2004 Daniel DIERMEIER, Hülya ERASLAN and Antonio MERLO (lxx): Bicameralism and Government Formation CTN 82.2004 Rod GARRATT, James E. PARCO, Cheng-ZHONG QIN and Amnon RAPOPORT (lxx): Potential Maximization

and Coalition Government Formation CTN 83.2004 Kfir ELIAZ, Debraj RAY and Ronny RAZIN (lxx): Group Decision-Making in the Shadow of Disagreement CTN 84.2004 Sanjeev GOYAL, Marco van der LEIJ and José Luis MORAGA-GONZÁLEZ (lxx): Economics: An Emerging

Small World? CTN 85.2004 Edward CARTWRIGHT (lxx): Learning to Play Approximate Nash Equilibria in Games with Many Players IEM 86.2004 Finn R. FØRSUND and Michael HOEL: Properties of a Non-Competitive Electricity Market Dominated by

Hydroelectric Power KTHC 87.2004 Elissaios PAPYRAKIS and Reyer GERLAGH: Natural Resources, Investment and Long-Term Income CCMP 88.2004 Marzio GALEOTTI and Claudia KEMFERT: Interactions between Climate and Trade Policies: A Survey IEM 89.2004 A. MARKANDYA, S. PEDROSO and D. STREIMIKIENE: Energy Efficiency in Transition Economies: Is There

Convergence Towards the EU Average? GG 90.2004 Rolf GOLOMBEK and Michael HOEL : Climate Agreements and Technology Policy

(lix) This paper was presented at the ENGIME Workshop on “Mapping Diversity”, Leuven, May 16-17, 2002 (lx) This paper was presented at the EuroConference on “Auctions and Market Design: Theory, Evidence and Applications”, organised by the Fondazione Eni Enrico Mattei, Milan, September 26-28, 2002 (lxi) This paper was presented at the Eighth Meeting of the Coalition Theory Network organised by the GREQAM, Aix-en-Provence, France, January 24-25, 2003 (lxii) This paper was presented at the ENGIME Workshop on “Communication across Cultures in Multicultural Cities”, The Hague, November 7-8, 2002 (lxiii) This paper was presented at the ENGIME Workshop on “Social dynamics and conflicts in multicultural cities”, Milan, March 20-21, 2003 (lxiv) This paper was presented at the International Conference on “Theoretical Topics in Ecological Economics”, organised by the Abdus Salam International Centre for Theoretical Physics - ICTP, the Beijer International Institute of Ecological Economics, and Fondazione Eni Enrico Mattei – FEEM Trieste, February 10-21, 2003 (lxv) This paper was presented at the EuroConference on “Auctions and Market Design: Theory, Evidence and Applications” organised by Fondazione Eni Enrico Mattei and sponsored by the EU, Milan, September 25-27, 2003 (lxvi) This paper has been presented at the 4th BioEcon Workshop on “Economic Analysis of Policies for Biodiversity Conservation” organised on behalf of the BIOECON Network by Fondazione Eni Enrico Mattei, Venice International University (VIU) and University College London (UCL) , Venice, August 28-29, 2003 (lxvii) This paper has been presented at the international conference on “Tourism and Sustainable Economic Development – Macro and Micro Economic Issues” jointly organised by CRENoS (Università di Cagliari e Sassari, Italy) and Fondazione Eni Enrico Mattei, and supported by the World Bank, Sardinia, September 19-20, 2003 (lxviii) This paper was presented at the ENGIME Workshop on “Governance and Policies in Multicultural Cities”, Rome, June 5-6, 2003 (lxix) This paper was presented at the Fourth EEP Plenary Workshop and EEP Conference “The Future of Climate Policy”, Cagliari, Italy, 27-28 March 2003 (lxx) This paper was presented at the 9th Coalition Theory Workshop on "Collective Decisions andInstitutional Design" organised by the Universitat Autònoma de Barcelona and held in Barcelona,Spain, January 30-31, 2004

2003 SERIES

CLIM Climate Change Modelling and Policy (Editor: Marzio Galeotti )

GG Global Governance (Editor: Carlo Carraro)

SIEV Sustainability Indicators and Environmental Valuation (Editor: Anna Alberini)

NRM Natural Resources Management (Editor: Carlo Giupponi)

KNOW Knowledge, Technology, Human Capital (Editor: Gianmarco Ottaviano)

IEM International Energy Markets (Editor: Anil Markandya)

CSRM Corporate Social Responsibility and Management (Editor: Sabina Ratti)

PRIV Privatisation, Regulation, Antitrust (Editor: Bernardo Bortolotti)

ETA Economic Theory and Applications (Editor: Carlo Carraro)

CTN Coalition Theory Network

2004 SERIES

CCMP Climate Change Modelling and Policy (Editor: Marzio Galeotti )

GG Global Governance (Editor: Carlo Carraro)

SIEV Sustainability Indicators and Environmental Valuation (Editor: Anna Alberini)

NRM Natural Resources Management (Editor: Carlo Giupponi)

KTHC Knowledge, Technology, Human Capital (Editor: Gianmarco Ottaviano)

IEM International Energy Markets (Editor: Anil Markandya)

CSRM Corporate Social Responsibility and Management (Editor: Sabina Ratti)

PRA Privatisation, Regulation, Antitrust (Editor: Bernardo Bortolotti)

ETA Economic Theory and Applications (Editor: Carlo Carraro)

CTN Coalition Theory Network