International climate-control or environmental agreements have substantial impacts on international terms of trade. This would seem to suggest that international environmental coalitions cooperating on climate control could penalize non-cooperating countries through trade sanctions. However, alternative approaches exist in which cooperating nations provide incentives for non-cooperating nations to join their coalition. This paper investigates potential impacts of trade sanctions against non-cooperating nations. It compares different climate coalitions and their impacts on trade and international spillover effects if freeriding countries are sanctioned with trade restrictions. Specifically, the paper looks at the Kyoto Protocol as the prime example of a climate-policy coalition, and the United States as the most important noncooperating country. Modeling indicates that trade restrictions are not the right tool to induce noncooperating nations to join a coalition. The United States could most likely be persuaded to cooperate if developing nations participated in a climate-policy coalition in which they both benefited from technology transfer and from emissions trading. Further, it appears that developing countries would benefit most if they participated in international emissions trading without binding emission-reduction targets.
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