Conference Agenda

This paper develops a New Economic Geography model of two regions with

polluting firms subject to regional abatement policies. Pollution accumulates in

the local environment and decreases the welfare of the population. Firms exhibit

different levels of productivity, with the more productive firms emitting less emissions

per unit of output. Only the more productive firms can afford the fixed

costs of entering the export market, while the less productive ones produce only

for domestic consumers. Environmental policy has two opposing welfare effects: it

reduces nominal wages and increases environmental quality. Environmental policy

also raises production costs, which induces some firms to stop exporting and

pushes less productive firms out of the market. This paper investigates the effects

of environmental policy on the geolocation of the most productive firms and its

welfare consequences.

In this study, we conduct an ex-ante socio-economic assessment of a global climate policy implemented in a scenario where labour and capital are mobile at the international level. We start from a Computable General Equilibrium model that includes a carbon tax module and a simple migration module driven by the dynamics in the global labour market. We introduce in the model a uniform global carbon tax to achieve a 20% reduction in global CO₂ emissions. The results show an increase of world GDP after the introduction of the carbon tax, which is unexpected in the neoclassical framework adopted in this work. We then use a simplified theoretical model to interpret and generalize the results. The main reason for such global gain is capital and labour movement toward low emission intensive economies of Europe and North America. However, the unequal ratios between units of labour and population in the Global South and the Global North lead to a worsening of GDP per capita in most of the regions. The paradox of world and regional GDP per capita patterns can further undermine the political acceptability of the mitigation policy combined with a more open global labour market despite the higher economic efficiency reached with this policy combination. This, in turn, highlights the need for additional redistributive measures within countries.

Geopolitical tensions and energy-security concerns are reviving protectionist measures. Using a harmonized protocol across multiple integrated assessment models, we assess fossil-energy import tariffs based on the carbon content of imported fuels, with and without trade retaliation, and with green industrial policy and no technology cooperation. Tariffs accelerate renewables but deliver limited climate benefits, about 9% of the mitigation required for a Paris-consistent pathway, and impose macroeconomic costs. Retaliation raises GDP losses in the Global South (by more than 0.3 percentage points) and increases volatility for fossil exporters (up to a 1.2 percentage-point range). Uneven critical material resources imply that self-sufficiency reshuffles dependencies rather than eliminating them. Shutting off technology spillovers raises costs (up to 5% GDP) and slows transitions, whereas recycling tariff revenues into domestic clean investment yields up to 4% GDP gains and further cuts CO2. We propose this framework as a baseline for IAM climate assessments under geopolitical fragmentation.

This paper studies the formation of self-enforcing international environmental agreements (IEAs) in the presence of climate tipping points when countries are heterogeneous. Building on Barrett’s (2013) climate-tipping framework, we introduce ex-ante asymmetries in abatement benefits, abatement costs, and climate damages, while incorporating both gradual climate change and irreversible catastrophic losses. The model highlights two distinct coordination problems: coordination between secure and precarious equilibria, and coordination within the secure equilibrium among coalition members and non-members. Adopting a linear–quadratic payoff structure with a deterministic tipping threshold, we formally define three key objects of uncoordinated abatement, abatement tolerance, and additional willingness to abate, which allow for a systematic characterization of equilibrium behavior and coalition stability under asymmetry. We show that asymmetries fundamentally reshape coalition formation. When the grand coalition is stable, it is uniquely stable, extending Barrett’s uniqueness result to fully asymmetric settings. However, unlike the symmetric benchmark, asymmetries can also generate uniquely stable proper coalitions that are capable of averting climate catastrophe. The stability of the grand coalition critically depends on coordination between the coalition and the fringe, with Stackelberg leadership representing an extreme but analytically tractable coordination device. Numerical simulations with two-type and fully heterogeneous countries illustrate how asymmetry expands the range of stable coalition structures and, in some cases, allows smaller coalitions to prevent disastrous outcomes when universal participation fails. Overall, the analysis demonstrates that heterogeneity, while complicating coalition patterns, can enhance the effectiveness of self-enforcing climate agreements in the presence of tipping risks.