Unilateral Actions the Case of International Environmental Problems

sions in expression [1]. One proposal is as follows: define a country’s wealth
(utility) connected with the emission as w_i = λu^IG(q_i,c_i) + (1-λ)u^EG(q) . Wealth
in country i is given by wi(qi,q,ci) . Given this specification, define now
q_i^nc = argmaxw_i((q_i,q,c_i) . Given the discussion above, we have that

_∂q_inc             _∂q_inc

-½- < 0 and i^> > 0

∂ρ          ∂q_-

From the above discussion, we immediately derive that

EG

^du

. ∂ q I

-----^- = 0. The higher the costs, the more the IG suffers if it
∂c_i

has to make reductions, and the more this group is willing to lobby against re-
duction (the marginal gain from lobbying is increasing in c). On the other hand,
the EG is suffering from global emissions, but the level of costs has no effect on
the utility of the EG.¹⁷

In this way qi is chosen as the welfare maximizing choice of country i (as a
trade-off between conflicting preferences of two influential interest groups, and
in optimum balancing the benefit to the EG of the reductions with the costs of
doing so for the IG).

In all countries, where the political decision process is as described above, the
industry has incentives to try to make policy makes believe that costs are high.
Compared to the model in section 5, this better explains the assumption about
the high correlation of costs. Since the correlation is related to the political sys-
tems in a country. Given identical political systems, the incentives to believe
that costs are high are also identical. It, moreover, also better explains how the

17 Other specifications could be used, but what is important is how the cost estimates influence a
country’s choice of reductions.

34

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