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Model of International Climate Agreements (MICA)

a) Models of coalition formation endogenize whether or not regions within a model cooperate, therefore avoiding the extreme assumption of no cooperation and full cooperation. The purpose of this coalition model is to identify incentive schemes that facilitate global cooperation on climate change mitigation and to explore possible designs for Kyoto-like international environmental agreements. The effects of import tariffs and technology protocols have already been investigated, ongoing work is exploring the CDM.

b) The model is implemented and operated by Kai Lessmann with conceptual contributions by Ottmar Edenhofer and Robert Marschinski.

c) Currently, the model is applied in conceptual studies assuming symmetric (identical) regions. A model version with heterogeneous, real world regions is implemented but needs further calibration. Other possible extensions include dynamic coalition formation, e.g. modeling multiple commitment periods, and disaggregating regions into private sector and government to study the interplay of climate negotiations and national climate policies.

d) Our model features an innovative solution algorithm, which allows us to solve for a Nash Equilibrium with coalitions, international trade, and multiple externalities.

[3] Kai Lessmann, Robert Marschinski, Ottmar Edenhofer, The effects of tariffs on coalition formation in a dynamic global warming game, Economic Modelling, DOI: 10.1016/j.econmod.2009.01.005.