International cooperation to combat climate change

Climate change is a global pollution problem and therefore regulation of this public bad requires international institutions. Since we do not have a government at the level of the world as a whole, we have to rely on voluntary cooperation between states. The literature on international environmental agreements is usually very pessimistic on the possibility to sustain large coalitions and the Kyoto Protocol proves this in practice. In this paper a number of options are developed that improve the situation. If the R&D costs of investments in green capital can be shared among the sig-natories, the size of the stable coalition can get larger. Further-more, if asymmetries are considered and the coalition consists of countries or regions with different characteristics, again the result can be improved, especially if transfers between signatories are possible. The paper develops an application to a set of six countries or regions in the world: USA, Japan, OECD Europe, Eastern Europe, Former Soviet Union and China.