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International climate policies are being shaped in a process of ongoing negotiations. This paper develops a sequential game framework to explore the stability of international climate agreements allowing for multiple renegotiations. We analyse how the incentives to reach an international climate agreement in the first period will be impacted by the prospect of further negotiations in later periods and by the punishment options related to renegotiations. For this purpose we introduce a dynamic model of coalition formation with twelve world regions that captures the key features of the climate-economy impacts of greenhouse gas emissions. For a model with one round of renegotiations we find that a coalition of China and the United States is the unique renegotiation proof equilibrium. In a game with more frequent renegotiations we find that the possibility to punish defecting players helps to stabilise larger coalitions in early stages of the game. Consequently, several renegotiation proof equilibria emerge that outperform the coalition of China and USA in terms of abatement levels and global payoff. The Grand Coalition, however, is unstable. [ABSTRACT FROM AUTHOR]

This paper studies the impact of pragmatic and optimal transfer schemes on the incentives for regions to join international climate agreements. With an applied model that comprises twelve world regions we investigate: (i) a benchmark without transfers, (ii) scenarios with allocation-based rules where coalition members receive tradable emission permits proportional to initial or future emissions, (iii) scenarios with outcome-based rules where the coalition surplus is distributed proportional to emissions, and (iv) a scenario based on an optimal sharing rule where the coalition surplus is distributed proportional to outside option payoffs. We find that well-designed transfer schemes can stabilise larger coalitions and increase global abatement levels. In our applied setting we find that for allocation-based and outcome-based rules only small coalitions are stable, and, in the case of grandfathered emission permits, there is no stable coalition at all. Some obstacles associated with grandfathered emission permits can be overcome by incorporating the expected growth of emissions in developing countries in the distribution of emission permits. For the optimal transfer scheme we find that larger coalitions, which include key players such as the United States and China, can be stable, but no transfer scheme is capable of stabilising the Grand Coalition. [Copyright &y& Elsevier]