Efficiency vs. stability of climate coalitions: a conceptual and computational appraisal

This paper evaluates with numbers the respective merits of two competing notions of coalition stability in the standard global public goods model as customarily applied to the climate change problem. To this effect it uses an the integrated assessment CWS model. After a reminder of the two game theoretical stability notions involved – namely, core-stability and internal-external stability – and of the CWS model structure, the former property is shown to hold for the grand coalition provided that resource transfers of a specific form between countries are introduced. Further, while the latter property holds neither for the grand coalition nor for most large coalitions, it is verified for most small coalitions in a weak sense that involves transfers. Finally, it is shown that coalitions, stable in either sense, that perform best in terms of carbon concentration and global welfare, are always heterogeneous ones.