Thematic Review of Studies on International Environmental Agreements

Abstract

This study reviews the existing research on international environmental agreements (IEAs) from the perspective of environmental economics, with a particular focus on recent research trends and classic theoretical models. Since the last century, the body of research surrounding IEAs has steadily grown, with numerous scholars exploring various approaches to the formation of stable and effective agreements. While some studies have attempted to organize this literature, classifications based on thematic features remain relatively rare. Therefore, this work identifies common threads across the literature addressing transboundary pollution issues and categorized them thematically, highlighting both recent focal points and classic models. Specifically, the existing research on addressing transboundary pollution is divided into four categories: studies focusing on the national attributes, the mechanisms of cooperation within IEAs, the structures of IEA cooperation, and the alternative approaches beyond IEAs. This review aims to provide policymakers with a clear summary of recent research on international environmental cooperation and to offer advanced guidance for achieving global sustainable development.

1. Introduction

Since the latter half of the 20th century, as global pollution problems have become increasingly severe with rapid economic growth, addressing environmental issues—or, from a contemporary perspective, preserving the Earth’s habitability—has emerged as a critical concern. In earlier years, the dominant approach prioritized economic development at the expense of the environment. This was particularly evident following the two industrial revolutions, when emissions of harmful substances such as sulfur dioxide and carbon dioxide enveloped rapidly developing regions, including Europe and the United States. Entering the 21st century, many developing countries followed a similar trajectory. Hazardous chemicals have infiltrated ecosystems in various forms, contributing to well-documented environmental crises such as acid rain, ozone depletion, and global warming. Just as the timeline for Venice’s submersion can be precisely estimated and the 1.5 °C temperature rise by 2030 is widely recognized, the solution to environmental crises is equally clear: cooperation.

Unfortunately, both environmental preservation and pollution entail externalities. No single country’s independent effort to reduce emissions is substantial enough to make a meaningful impact, yet all countries benefit from the emission reductions undertaken by others. The presence of free riding impedes the prospects of effective international cooperation. At neither the regional nor the global level does absolute authority exist to compel nations to engage in environmental cooperation. If all countries opt to free-ride, environmental crises will escalate in unprecedented ways worldwide, illustrating what researchers have identified as the prisoner’s dilemma in international environmental cooperation [1].

Since the 1972 Stockholm Conference initiated the negotiation process for international environmental agreements (IEAs), more than a hundred bilateral and multilateral agreements have been established. Some of these address regional environmental issues, such as the Helsinki and Oslo protocols, which tackled acid rain caused by sulfur dioxide emissions in Europe. Others focus on global environmental challenges, such as the series of treaties on climate change, starting with the United Nations Framework Convention on Climate Change (UNFCCC), which remains the most widely known and continuously negotiated effort to combat global warming.

An examination of these agreements’ outcomes reveals a clear pattern: environmental agreements involving fewer countries tend to be more successful. (For instance, the initial agreement to protect seals was successfully negotiated among just three countries, but as Japan and other nations later joined, the treaty ultimately became unsustainable.) In contrast, agreements requiring broad international cooperation face significant challenges in maintaining long-term commitment (While the Montreal Protocol achieved a rare success, its exceptional nature is underscored by Barrett’s assertion that its success was unique and not easily replicable [1]). Barrett [2] and Carraro and Siniscalco [3] use stage-game models to formalize the classic trade-off between “broad but shallow” and “narrow but deep” cooperation. This underscores the difficulty of achieving stability and efficiency in environmental treaties.

Reviewing climate negotiations reveals early signs of difficulty. The earliest efforts date back to the 1988 Toronto Targets, which called for a 20% CO₂ reduction from the 1988 levels by 2005. Endorsed by 46 countries, they led to various unilateral pledges. For example, New Zealand aimed for completion by 2000, while the EU set a collective goal to stabilize emissions at the 1990 levels by 2000. However, these non-binding goals were rarely met. A key example came after the Rio Earth Summit in 1992, when the European Union (EU) made its carbon tax conditional on similar action by other OECD countries [1]. The U.S. refused, citing heavy economic losses. This highlights the core challenge of emissions cooperation: balancing costs and benefits. This feature is evident throughout subsequent negotiations.

In 1994, the Framework Convention on Climate Change (FCCC) came into force with 189 parties. However, because the U.S. rejected the EU’s conditions, no binding reduction targets were set, and the convention did not require any country to cut emissions at any level. The document called for annual meetings of the parties, known as conferences of the parties (COPs), but progress through these procedural meetings has remained slow.

The first COP was held in Berlin, laying the groundwork for the Kyoto Protocol. This meeting focused on reducing commitments to developed countries, requiring them to set clear timetables. At the Kyoto meeting in 1997, the protocol formally assigned reduction obligations to developed nations. Although most countries agreed to this concentrated burden, the loss of benefits led some—such as the U.S.—to refuse cooperation. The U.S. clearly stated in 1997 that it would not accept a treaty harming its economic interests. Despite signing in 1998, it withdrew in 2001. Meanwhile, most countries that signed the Kyoto Protocol had no binding reduction commitments.

How effective was the Kyoto Protocol? According to the UNFCCC, the total greenhouse gas emissions (GHGs) of the member countries had dropped about 22.6% below the 1990 levels by 2012 [4]. Maamoun [5] finds a 7% reduction compared to the pre-Kyoto levels. On the surface, this seems successful. However, scholars have confirmed that this was mainly due to the industrial collapse in Eastern Europe and the former Soviet Union, not direct climate actions by developed countries [6,7]. Moreover, Kyoto did not impose reduction obligations on developing countries, whose emissions have since offset the gains by the parties [8]. Clearly, emission cuts with only developed country participation are ineffective.

At COP21 in 2015, the Paris Agreement was adopted to replace the Kyoto Protocol. It introduced nationally determined contributions (NDCs), allowing countries to set their own emission targets. This flexible approach attracted most countries worldwide to sign; however, many scholars have questioned the agreement’s binding force and effectiveness [7,9,10]. The data show that global GHG emissions grew about 1.5% annually between 2015 and 2019 [11]. Negotiations to address climate change continue, and while COP29 has seen some progress, the results remain limited.

National interests are the main driver for action, especially when enforcement relies on self-compliance. Unfortunately, the impacts of most environmental problems are not uniform across countries, which makes it challenging to achieve consensus on issues of international environmental cooperation. Understanding the divergence in countries’ behaviors regarding participation in IEAs requires a careful examination of the heterogeneity in the benefits derived from cooperation. Although environmental cooperation appears to be solely concerned with ecological issues, it is in fact a multifaceted matter that encompasses economic interests, political dynamics, and international relations.

When discussing national interests, the benefits derived from agreements are frequently emphasized. From an economic perspective, cost–benefit analyses of such agreements have consistently provided strong justification for a country’s decision to support or oppose cooperation. These analyses also offer insights into the relative difficulty of achieving cooperation. For instance,

Table 1. Economic comparison (in billions).

	Benefit	Cost	B-C Ratio
Protecting ozone layer	USD2775	USD250	11:1
CO2 reduction	USD681	USD1365	0.5:1

Source: Barrett [12], originally based on data from Velders et al. [13] and Nordhaus and Boyer [14], with currency converted by Barrett.

presents the cost–benefit comparisons of agreements aimed at ozone protection and those focused on CO₂ reduction. The results suggest that the net benefits of protecting the ozone layer significantly exceed those of reducing CO₂ emissions.

Additionally, trends in environmental cooperation may also indirectly promote technological advancement and improvements in energy structures. When firms perceive that the phase-out of highly polluting inputs is inevitable, they are incentivized to increase investment in the development of clean energy and technologies, thereby accelerating industrial upgrading and technological progress. For instance, during the negotiations of the Montreal Protocol, U.S. chemical companies, anticipating the implementation of regulatory measures on CFCs, intensified their efforts to develop substitutes. The success of these R&D activities subsequently enabled the U.S. to take a leadership role in the negotiations. Empirical studies support this view, showing that emission reduction efforts promote the development of advanced technologies, sustainable energy, and green innovation, thereby enhancing a country’s overall technological capacity and international competitiveness through both domestic initiatives and technology transfer [15,16].

However, despite these tangible benefits that international environmental cooperation can bring, these factors are not the sole determinants of countries’ negotiation stances. In many cases, the outcomes of cost–benefit analyses do not appear favorable, and the potential of environmental cooperation to promote economic or technological progress may also be limited. Therefore, the initial drivers shaping a country’s position in environmental negotiations are, in fact, rooted in three other categories of interest.

First, there are the benefits associated with mitigating natural disaster risks. It is evident that countries threatened by a particular environmental problem often take on leadership roles in promoting environmental negotiations. For example, in the context of global warming, the 32 small island states vulnerable to sea-level rise formed the Alliance of Small Island States (AOSIS), which has played a leading role in climate negotiations. Similarly, in the case of air pollution, Sweden and Norway, both severely affected by acid rain, have been prominent advocates urging countries to engage in negotiations.

Another decisive factor lies in economic interests. Beyond the direct benefits previously discussed, economic considerations are manifested in aligning with domestic economic interests and seeking external compensation. Specifically, the interests of domestic industries significantly influence a country’s negotiating position. For instance, Norway’s whaling industry, which has been severely impacted by international whale protection regulations, has prompted the government to defend Norway’s whaling rights. In the United States, powerful domestic industries such as oil, gas, and chemical manufacturing have often driven the country to adopt either opposition or ambivalence toward emission reduction negotiations. In contrast, the EU has consistently taken a proactive stance on phasing out fossil fuels. This is largely because the EU has long depended on imported fossil fuels and has consequently developed the capacity to sustain economic growth without relying on them. The gradual phasing out of fossil fuels not only helps mitigate risks associated with natural disasters but also aligns with the EU’s broader developmental trajectory.

At the same time, economic interests can also shape countries’ cooperative attitudes through externally driven incentives. Many countries often shift their stance in negotiations to secure greater economic benefits. For example, during the ozone layer protection negotiations, China and India initially moved from a swing position to opposition in order to increase bargaining power. It was not until developed countries agreed to provide financial support in 1990 that they shifted to join the agreement [17].

The third driving force is political interest, which includes international prestige and diplomatic considerations. Before deciding whether to join an IEA, a country often considers the prevailing global stance on the issue. Its position may be shaped by international pressure. For instance, at the 1992 Earth Summit, the United States faced isolation for not joining the Convention on Biological Diversity (CBD). Although Japan and Germany shared similar concerns about the agreement, they chose not to oppose it, motivated by a desire to maintain international prestige. The United States remarked that both countries had departed from its position in part to demonstrate their emerging status on the global stage [18].

All the above indicates that sustaining international environmental cooperation remains a highly complex and difficult task. Benefits brought by IEAs are often insufficient to ensure that countries participate voluntarily and effectively. The current state of international environmental cooperation urgently calls for the development of an incentive mechanism that reflects both gains and costs.

In recent years, research on IEAs has grown steadily, spanning a wide range of disciplines including environmental science, economics, law, and more. Among these, the field of economics stands out as one of the most active areas of IEA-related research, showing a consistent upward trend (Figure 1 and Figure 2). This highlights the important role that economic analysis plays in understanding and informing IEAs. Accordingly, this paper focuses on reviewing and analyzing the literature on IEAs within the economics domain.

IEA studies from an economic perspective can be broadly divided into theoretical and empirical studies, with the former being more prominent in the existing body of work.

In theoretical analyses, game theory is commonly employed, with stage games and repeated games being the most representative methodologies.

Stage games analyze IEAs by breaking down the participation decisions of countries into sequential phases, thereby deriving the conditions for stable cooperation. Generally, a stage game consists of two fundamental phases (as in Figure 3). To examine the stability of IEAs, additional stages can be incorporated based on the research focus. For instance, studies on the role of social organizations in promoting international cooperation may introduce an additional phase where these organizations announce their contributions and fulfill their commitments, leading to a four-stage game [19]. Similarly, research on the impact of geoengineering on environmental agreement stability may include a stage in which countries decide whether to adopt geoengineering as a means of mitigating environmental crises [20].

Stage-game-based analyses ensure that each country’s decisions at every phase maximize its benefits. The stability of an agreement is typically assessed by considering two conditions: internal stability, where the benefits of staying in the agreement outweigh those of leaving for member countries, and external stability, where the benefits of not joining exceed those of joining for non-members. Barrett [2] and Carraro and Siniscalco [3] use stage-game models to demonstrate that agreements involving a small number of countries are more likely to enhance global welfare. In contrast, large-scale agreements tend to result in lower contributions from participating countries and face significant challenges in maintaining long-term stability.

Repeated games provide an alternative approach to studying IEAs, distinct from stage games. In repeated games, the same interaction occurs repeatedly, and the introduction of punishment mechanisms makes cooperation more likely to be sustained. Given the long-term nature of international environmental cooperation and the possibility that member countries may defect from agreements over time, repeated games offer a more realistic framework for analyzing the choices that countries face in different cases.

Farrell and Maskin [21] define a classic stability concept in repeated games of environmental cooperation, known as the weakly renegotiation-proof (WRP) equilibrium. This equilibrium consists of two conditions: the subgame perfect Nash equilibrium and the renegotiation-proof equilibrium. The former ensures that cooperation remains the optimal choice for member countries under any circumstances, while the latter prevents renegotiation after defection has occurred.

Building on the definition of the WRP equilibrium, numerous researchers have explored strategies that countries may adopt to promote high participation and long-term cooperation in IEAs. The basic strategies include the tit-for-tat strategy and the getting even strategy, while notable adaptations for IEAs include the regional penance strategy and the penance-m strategy [22,23]. As research on long-term cooperation in IEAs continues to evolve, new strategies incorporating additional factors have emerged, such as strategies accounting for countries prone to frequent natural disasters and those linking environmental agreements with trade and other issues [24,25].

In addition to theoretical analyses, empirical studies have explored how countries can maintain effective cooperation within IEAs [26,27,28]. Since the first COP meeting, research on IEAs has expanded significantly. Numerous literature reviews have summarized this topic from various perspectives, usually focusing on a specific aspect of IEA studies. Representative reviews and their focus areas are listed in

Table 2. Representative reviews on IEA research.

Author	Focus
Barrett [29]	negotiation processes and history
Barrett [30]	game processes and classic models
Takashima and Fujita [31]	cooperation strategies
Mitchell et al. [32]	IEADB database
Karlsson-Vinkhuyzen et al. [33]	cooperation agencies
Pouw et al. [34]	50 articles published in International Environmental Agreements: Politics, Law & Economics

.

A precise focus enables deeper and more thorough summaries, but it also brings limitations. The literature reviews mentioned above each deeply summarize a specific aspect, essentially selecting and reviewing only a portion of the vast research while ignoring others. Moreover, scholars choose their review focus based on different criteria, resulting in many diverse IEA reviews that make it difficult for policymakers to find one comprehensive overview covering research hotspots and trends. While IEA research has diversified across negotiation, cooperation, membership, and strategy, no review to date has categorized these works by specific features or offered a prospective summary. This work aims to fill that gap.

This study uses a narrative literature review to thematically categorize IEA research based on key elements. Narrative literature reviews provide qualitative synthesis and thematic analysis of existing research. They differ from systematic reviews and are appropriate for studies aiming to summarize research themes and developments without relying on statistical meta-analysis [35,36].

This paper outlines the most widely discussed topics and classic models to provide a clearer classification and summaries of existing IEA studies. This review intends to offer new guidance toward global sustainable development goals and serves as a convenient reference for scholars and policymakers to navigate the current state of IEA research.

The following sections categorize the existing literature into four main areas: studies focusing on the national attributes, the mechanisms of cooperation within IEAs, the structures of IEA cooperation, and the alternative approaches beyond IEAs for addressing environmental challenges (as shown in

Table 3. Overview of themes.

Theme	Description
Player Characteristics (Section 2.1)	Studies focusing on the characteristics of participating states, such as benefit and cost structures.
Cooperation Mechanism (Section 2.2)	Studies focusing on instruments to promote cooperation among member states, such as financial transfers and compensation mechanisms.
Cooperation Structure (Section 2.3)	Studies focusing on concrete forms of cooperation, such as trade linkages and coordination on research outcomes.
Beyond IEAs (Section 2.5)	Studies focusing on non-IEA forms of international environmental cooperation, such as carbon-pricing instruments and geoengineering.

). These categories refer to the main perspectives found in the literature, and the models described in the next section serve as representative analytical frameworks within each research stream.

2. Thematic Analysis of IEAs

2.1. Player Characteristics

This section summarizes studies that focus on the characterization of the players (i.e., countries). With the expansion of the literature on promoting international cooperation in addressing transboundary pollution, an increasing number of researchers have incorporated the properties of countries into their models, gradually shifting from abstract frameworks to more realistic representations.

The theoretical models of IEA research are generally consistent, expressing the benefit function as the difference between the benefits of emission reductions and the costs of them. In the models, the emission reduction in country $i$ is usually denoted as $q_i$, while the global emission reduction is represented as $Q=\sum q_i$. Let $B\left(Q\right)$ represent the benefit function that is common to each country and $C\left(q_i\right)$ represent the cost function; the payoff function of country $i$ can be written as ${\pi }_i$ in the following form.

$${\pi }_i=B\left(Q\right)-C\left(q_i\right)$$

(1)

This is the basic model for studying long-term cooperation in IEAs. In the research, the emission reduction benefit $B\left(Q\right)$ is typically represented as a linear function of the global total emission reduction with the benefit coefficient $b$, such as $B\left(Q\right)=bQ$. Linear and quadratic cost functions are the most used forms by researchers, such as $C\left(q_i\right)=c{q}_i$ or $C\left(q_i\right)=c\frac{q_i^2}{2}$, where $c$ represents the coefficient regarding the marginal cost of reduction [1,19,24,37,38].

In recent years, the study of player characteristics, particularly the functional forms of benefit functions, has become one of the popular directions in international environmental cooperation research. These studies focus on altering the forms of benefit functions and exploring the possibilities for countries to achieve long-term stable cooperation. One of the key research topics in this area is the ancillary benefits brought by emission reductions.

The combustion of fossil fuels emits various secondary pollutants, and when countries reduce their GHGs, they simultaneously reduce regional pollutants. It is not hard to imagine that a country’s emission reduction measures not only bring global benefits but also provide benefits to the country itself [39,40,41,42]. Compared to Equation (1), where the benefit function is solely derived from the global total emission reduction, the payoff function that considers ancillary benefits would be expressed in the following form in terms of modeling.

$${\pi }_i=B\left(Q\right)+\alpha B\left(q_i\right)-C\left(q_i\right)$$

(2)

$\alpha B\left(q_i\right)$ represents the ancillary benefits generated for country $i$ from its emission reductions, where $\alpha$ is the coefficient of ancillary benefits.

Many studies have explored the existence of ancillary benefits. Finus and Rübbelke [43] examine the impact of ancillary benefits on IEA participation, and their conclusion is consistent with Barrett [2]; they argue that agreements with only a few participating countries are more likely to be sustained, and the presence of ancillary benefits could be an obstacle to large-scale environmental agreements. However, Takashima [42] revisits the existence of ancillary benefits using repeated games and confirms that, if an effective penalty mechanism is ensured, the presence of ancillary benefits would not negatively affect the stability or scale of the agreement.

The ancillary benefits of emission reduction for individual countries have already begun to manifest in practice. For instance, the Climate and Clean Air Coalition (CCAC) highlights that controlling pollutants such as methane and black carbon not only helps slow global warming but also significantly improves domestic air quality and public health. Similarly, the European Green Deal has emphasized that clean energy and green infrastructure can enhance long-term economic competitiveness. However, while the international community increasingly recognizes the co-benefits of emission reduction, this awareness alone is not yet strong enough to counteract the incentive to free-ride. Effective cooperation still requires a well-designed institutional push.

On the other hand, considering a country’s ability to adapt to environmental crises is another way to enrich the form of the benefit function. Models are often simplified by directly expressing the interests of countries as functions of emission reductions, but in reality, countries’ decisions about environmental governance are not only about how much to reduce emissions, but also about how much to adapt. In other words, adaptation to environmental crises can serve as a substitute for emission reductions, and the extent of emission reductions depends on how much environmental damage the country intends to adapt to [44,45]. In terms of modeling, each country’s payoff function can be expressed in the following form. Assuming $B\left(Q\right)=bQ$,

$${\pi }_i=b\overline{Q}-\left(1-\alpha a_i\right)b\left(\overline{Q}-Q\right)-\gamma a_i-C\left(q_i\right)=b\left[\alpha a_i\overline{Q}+\left(1-\alpha a_i\right)Q\right]-\gamma a_i-C\left(q_i\right)$$

(3)

In this model, $a_i\in \left\{0,1\right\}$ represents the decision of each country regarding adaptation, $\overline{Q}$ is the business-as-usual total emissions without any emission reduction or adaptation measures, $\gamma >0$ is the cost of implementing adaptation measures, and $\alpha \in [0,1]$ is the efficiency coefficient of the adaptation measures. Note that ${\pi }_i=bQ-C\left(q_i\right)$ when $a_i=0$, which is the same as in the basic model. From the model, the benefits of improving the environment for a country come from both emission reductions and adaptation, with these two factors jointly contributing to the payoff function. Barrett [45] explores this adaptation characteristic and confirmed that effective adaptation measures do not negatively affect the participation level in the agreement. On the contrary, when countries conduct adaptation measures, feasible adaptation options will increase the participation level in the agreement.

Enhancing the national adaptive capacity has also become a central focus at times. Numerous funding initiatives, such as the Adaptation Fund and the Africa Climate Change Fund, continue to support countries, particularly developing nations, in addressing climate-related challenges. While improving the adaptive capacity might be assumed to reduce the incentive to participate in mitigation efforts, current research suggests that adaptation and participation in IEAs are not necessarily in conflict. In fact, considering the uncertainty surrounding mitigation cooperation, investing in national adaptation remains an effective strategy.

So far, benefit functions have generally been represented by linear functions. However, the actual benefits or losses resulting from environmental improvement or degradation cannot always be accurately captured by a linear function. As a result, the mathematical form of the benefit function has become a key focus of research. Some scholars have explored the uncertainty of the benefit coefficient, where it is no longer treated as a fixed parameter, but instead modeled as a random variable. In these studies, the distribution of the random variable is often assumed to follow a normal distribution, meaning that if $b$ represents the benefit coefficient, then $b~N(\mu ,{\sigma }^2)$. Consequently, the benefit function of each country must be determined based on expectations, and the uncertainty affects the probability of different scenarios occurring. From a modeling perspective, Equation (1) can be rewritten as follows:

$${\pi }_i=P^1·E\left[B\left(Q^1\right)-C\left({q_i}^1\right)\right]+P^2·E\left[B\left(Q^2\right)-C\left({q_i}^2\right)\right]+\cdots$$

(4)

Here, $P$ represents the probability of a particular scenario occurring, while different superscripts denote different states under each scenario. Countries can estimate the value of coefficient $b$ and make reduction decisions accordingly. The probability $P$ can be influenced by various factors and may change depending on the research context. For example, André and Finus [38] explore how scientific research can help determine the true benefit coefficient. They argue that the probability of successfully discovering the actual benefit coefficient depends on a country’s investment in research and the spillover effects from the scientific achievements of other countries. This probability of research success can be expressed as follows:

$$P={\displaystyle \frac{Z_i+L_i\left(Z_{-i}\right)}{1+Z_i+L_i\left(Z_{-i}\right)}}$$

Here, $L_i\left(Z_{-i}\right)$ represents the technological spillover from other countries, which is a function of their research investments $Z_{-i}$. Using this model in a stage-game framework, they demonstrate that an IEA focusing solely on research collaboration achieves a higher participation level. However, global welfare remains lower than in cases where countries cooperate on emission reduction. They emphasize that prioritizing research collaboration at the expense of emission reduction efforts would be counterproductive, leading to suboptimal outcomes.

Another similar mathematical modification involves replacing the linear benefit function with an elastic benefit function. This type of literature introduces an elasticity coefficient $\gamma >0$ into the benefit function $B\left(Q\right)$. For example, Nkuiya [46] expresses the benefit function in the following form:

$$B\left(q_i\right)=\left\{\begin{array}{c}{\displaystyle \frac{q_i^{1-\gamma }-1}{1-\gamma }}, \gamma >1\\ \ln \left(q_i\right), \gamma =1\end{array}\right.$$

(5)

He argues that the elastic benefit function aligns more closely with real-world data. By utilizing this modified benefit function, he demonstrates that the scale of losses does not impact the level of cooperation. As long as the potential benefits of cooperation are sufficiently high, even when the scale of damage is relatively small, large coalitions can remain stable.

The aforementioned studies represent key research directions exploring the different aspects of national benefit functions recently. Most of them are built upon the basic model by incorporating various elements to examine their impact on long-term international cooperation. However, these studies generally treat welfare as a static outcome, determined solely by current decisions. While the literature incorporating dynamic variables is relatively scarce, discussions on this topic are by no means absent.

In studies addressing transboundary pollution mitigation, dynamic variables are often reflected in the “stock” [47,48]. The first category of such research focuses on pollution accumulation, treating pollution and emissions not as flow variables, but as stock variables that evolve over time. Unlike previous models, where welfare is characterized by emission reductions, dynamic analyses of pollution accumulation typically start from the damages caused by pollution. In these models, the cost is not limited to abatement expenditures, but also includes the harm caused by accumulated pollution. Mathematically, this can be expressed as follows:

$${\pi }_i(t)=B\left(Q\left(t\right)\right)-C(P(t),q_i(t))$$

(6)

$$\dot{P}(t)=E\left(t\right)$$

(7)

Here, $t$ represents time, $P\left(t\right)$ denotes the pollution stock at time $t$, and $E\left(t\right)$ represents the total emissions in period $t$, which depends on the global reduction. In the literature on pollution accumulation, some studies assume that natural purification is negligible, while others incorporate the self-cleaning capacity of the environment. When considering natural purification, Equation (7) can be expressed as $\dot{P}\left(t\right)=E\left(t\right)-kP(t)$, where $k>0$ is a coefficient representing the rate at which the environment naturally mitigates pollution.

In fact, the issue of stock pollution is not new. The U.S. Environmental Protection Agency’s Cumulative Impacts Research has confirmed that pollutants and extreme weather events in the environment gradually accumulate over time, originating from one or more sources across the built, natural, and social environments [49]. However, despite pollution accumulation being a well-recognized fact, the progress in negotiations on how to address this problem has been slow. For example, the proposal on how to end plastic pollution, put forward at the 2022 United Nations Environment Assembly, is still under negotiation.

Besides pollution accumulation, another commonly discussed stock variable is resource stock, which examines the remaining resources from a dynamic perspective [50,51]. Although the dynamic variables differ, the underlying concepts and modeling approaches are similar to those discussed above, and thus, they are not elaborated upon here. Studies incorporating dynamic accumulation analyses typically focus on variables that evolve over time, such as resources or pollution. In this context, the Markov equilibrium theory and Hamiltonian optimal paths are frequently employed analytical concepts.

Overall, the literature on international environmental cooperation largely focuses on the functional forms of welfare representation. Researchers have continuously enriched the depiction of national welfare by incorporating various influencing factors. However, when it comes to pollution as a variable, most studies treat it as a flow, while relatively fewer acknowledge the reality that pollution does not automatically dissipate over time. The impact of accumulation on the long-term stability of international cooperation remains an open question that requires further exploration in future research.

2.2. Cooperation Mechanism

This section summarizes the research focused on the cooperation mechanism within IEAs, specifically exploring how to enable efficient long-term cooperation among different countries. Due to the positive externality of environmental improvement, non-member countries will always choose to free-ride, and regardless of whether country heterogeneity is considered (which indeed exists), member countries will always have to bear a greater burden [2,52]. When addressing the question of how to promote participation and maintain cooperation among countries, reducing inequities is the most frequently discussed approach.

The most common way to reduce the burden on member countries is through financial transfers. Transfers can take two forms: internal transfers and external transfers. Internal transfers refer to a distribution of benefits within the alliance, where countries that gain more from the cooperation transfer benefits to countries that gain less or even incur losses due to cooperation, ensuring that each member country receives more benefits than they would by free-riding (also known as the optimal transfer scheme) (Eyckmans and Finus [53]). External transfers refer to financial support provided by non-member countries to encourage member countries to cooperate. The models in these studies add a portion of financial transfer income to the benefit function of Equation (1), and the payoff function for countries receiving transfers is represented as follows.

$${\pi }_i=B\left(Q\right)+T\left(s\right)$$

(8)

$T\left(s\right)$ represents the financial transfer received, which is determined by the total number of donor countries, denoted as $s$. In the existing literature, financial transfers are often assumed to be evenly distributed among all the recipient countries.

So far, many researchers have confirmed the positive impact of financial transfers on the long-term cooperation and global welfare of alliances. They have shown that both external and internal financial transfers have a positive effect on the stability of the alliance [54,55,56].

So far, there are many examples of financial transfers, without a strict distinction between external and internal. Initiatives such as International Climate Finance, the Clean Development Mechanism (CDM), and the Green Climate Fund are all funding programs through which developed countries provide financial support to developing countries. However, the CDM has gradually lost its mainstream status, while the Green Climate Fund operates under the framework of the Paris Agreement, whose overall effectiveness has been limited. Although financial support may indeed bring benefits to developing countries and incentivize their reduction efforts, the extent to which it contributes to reduction cooperation and how much benefit it generates remains open to debate.

Another method similar to transfers is refunding. The meaning of refunding varies in different studies, and the mainstream studies can be divided into two types of refunds: emission reduction refunds and research refunds.

Regarding reduction refunds, there are two well-known refund rules: output-based refunding (OBR) and expenditure-based refunding (EBR). The existence of this refund mechanism primarily serves as an alternative to domestic pollution tax policies to encourage enterprises to cooperate with emission reduction measures. In these types of studies, the focus shifts from the macroeconomic benefits of the country to the microeconomic benefits of enterprises. Specifically, the profit of enterprise $i$ can be expressed in the following two forms.

$$OBR:{\pi }_i=R\left(p,x_i\right)-T\left(x_i\right)-c{q}_i+b{x}_i$$

(9)

$$EBR:{\pi }_i=R\left(p,x_i\right)-T\left(x_i\right)-(c-b)q_i$$

(10)

In this case, $R\left(p,x_i\right)$ represents the profit function, $T\left(x_i\right)$ represents the tax function, $p$ represents the product price, $x_i$ represents the output quantity, $c$ represents the marginal cost of emission reduction, and $b$ represents the subsidy coefficient. From Equations (9) and (10), OBR provides refunds based on the output, while EBR provides refunds based on emission reduction expenditures.

As the real examples of these two mechanisms are not uncommon (For instance, Sweden used the OBR approach, and Norway used EBR), the literature on these two mechanisms is quite rich. For example, Fischer [57] and Gersbach and Requate [58] discuss the impact of OBR on the distribution, the efficiency, and the political economy, and its effects in special cases such as uncertainty and limited competition. The exploration of EBR has not been as extensive as that of OBR, but it remains a central topic of discussion. Millock and Nauges [59] analyze the refunding system in France conducted by foundations, specifically the taxe parafiscale (a type of tax surcharge). Hagem et al. [60] provide a thorough comparison of the two mechanisms, revealing that, in order to meet emission reduction targets, the fee rate under the OBR mechanism would be higher than under EBR, and it would have noticeably different impacts on the output of firms. They find that, while both mechanisms lead to the inefficient allocation of governance costs, they could help alleviate the impact of the original tax system and allow firms to maintain normal production.

Apart from the two refund methods mentioned above, combining financial support with repayment elements represents another form of integrated use. A typical example is the Green Climate Fund (GCF), which functions as a hybrid mechanism. It not only provides financial aid to developing countries, but also offers financing options, with the potential for partial or full repayment once the investment yields returns. This is clearly a way to amplify leverage. The GCF is considered to generate positive economic outcomes [61,62]. However, it is merely viewed as an aid instrument. The effectiveness in promoting collective cooperation remains open to discussion.

Moreover, in the context of research refunds, an alternative mainstream approach is the Initial Payment and Refunding Scheme (IPRS). This mechanism typically involves a third-party organization (TPO), where countries contribute funds upfront. If the target amount is reached, the TPO refunds a portion of the contributions proportionally; otherwise, the entire amount is returned. Under this framework, the TPO acts as an enforcer, establishing and publicly announcing a target amount $I$ and a refund amount $R$ before the agreement. Countries then commit funds accordingly before proceeding with emission reduction cooperation. In this model, the payoff function for participating countries is expressed as follows:

$${\pi }_i=-I+\delta \left[B\left(Q\right)-C\left(q_i\right)\right]+R$$

(11)

The parameter $\delta$ represents the discount factor.

Numerous studies have explored the IPRS mechanism. Gersbach and Hummel [63] propose a scheme where developed countries bear the initial payment, with partial refunds distributed to both developed and developing countries. This approach incentivizes developing countries to participate, thereby enhancing global welfare. Takashima [64] introduces a framework where funds are allocated specifically for research and development. Under this model, member countries first contribute the target amount, and upon successful research outcomes, a proportional refund is issued. This collaborative framework between an IEA and a TPO for technological advancement has been shown to significantly improve the participation levels in environmental agreements.

To date, refund mechanisms for joint research funding have seen limited practical use, although existing studies suggest that they hold significant potential. Given that TPOs lack binding authority over member states, concerns remain regarding the implementation transparency and operational procedures. The potential role and functions of TPOs in international environmental cooperation warrant further scholarly investigation.

Beyond the aforementioned mechanisms, several studies have explored alternative approaches to addressing inequities in IEAs. For instance, Takashima [24] examines the challenges faced by countries frequently affected by natural disasters, which may make it difficult for them to meet emission reduction targets. Other studies have focused on the heterogeneity between developed and developing countries, such as the works of McGinty [65] and Biancardi and Villani [66]. Additionally, research has considered the role of altruism in national decision-making, as discussed by van der Pol et al. [67]. These perspectives contribute to a broader understanding of how concerns about fairness influence international cooperation on environmental issues.

Overall, studies exploring new forms of cooperation mechanisms have often highlighted differences among countries, such as the distinction between signatories and non-signatories or between developing and developed nations. These differences have driven researchers to continuously seek new ways to bridge the gaps, ensuring that participation in emission reduction efforts is both fair and feasible. Additionally, the heterogeneity among nations is an undeniable reality. Existing IEAs include agreements that impose obligations on all types of countries, such as the Paris Agreement, as well as agreements that exclusively set obligations for developed nations, such as the Kyoto Protocol. Several empirical studies have assessed the effectiveness of climate agreements, with the results suggesting limited success in mitigating global warming. For instance, Aichele and Felbermayr [68] conduct a retrospective analysis of the Kyoto Protocol and find evidence of carbon leakage: the embodied carbon imports by Annex I countries from non-signatory countries increase by approximately 8%, and their import emission intensity rise by about 3%. Regarding the Paris Agreement, Al Mamun and Ehsanullah [69] use a panel vector error correction model and find that the agreement had no significant impact on emission trends in middle-income economies.

Although climate agreements have generally fallen short of expectations in practice, regardless of whether they include asymmetric countries, some studies have examined the impact of heterogeneity on cooperation [55,56,70]. However, the specific role of developing countries in such cooperation, and the effectiveness of their participation, remains underexplored. This represents a potential direction for future research.

2.3. Cooperation Structure

Barrett [71] summarizes the common features of successful IEAs to date, noting that they are all linked to other issues. This is called “issue linkage”. Integrating other issues into environmental cooperation, such as technological innovation and trade measures, can reshape the existing cooperation system and help mitigate the challenges that arise in environmental agreements.

In fact, research on issue linkage has been ongoing for nearly two decades. Especially following Nordhaus [72] and his exploration of climate clubs as an alliance model, the idea of integrating trade has increasingly enriched the discussions on international environmental cooperation. While the previous section reviewed new attempts to modify cooperation mechanisms, this section focuses on broader cooperative structures that extend beyond environmental agreements alone.

Issue linkage is one of the most extensively explored topics in restructuring cooperation, with trade linkages being the most thoroughly studied. Nordhaus [72] discusses the concept of a climate club, in which member countries grant each other preferential treatment while imposing sanctions on non-members—primarily through tariffs. Numerous studies have examined such trade reciprocity policies, with analytical perspectives broadly divided into macro- and micro-levels. The macro-perspective focuses on national participation decisions, while the micro-perspective examines the decisions of producers and consumers within trade markets.

In studies on trade linkage, it is typically assumed that there exists a tariff level $t$ and $k$ member countries. Within the agreement, member countries do not impose tariffs on each other due to reciprocal policies, but they levy tariffs on non-members, while non-members tax all countries normally (or only face tariffs from member countries). The payoff for each country under different tariff structures is denoted as ${\pi }_i\left(d_i,d_{-i}\right)$ (${\pi }_i\left(t,0\right)>{\pi }_i(0,0)$ > ${\pi }_i\left(t,t\right)>{\pi }_i\left(0,t\right)$), where $d_i$ represents country $i$’s tariff decision, with $d_i\in \{t,0\}$. In the macroeconomic perspective, the payoff function for trade linkages is typically expressed in the following form.

$${\pi }_i^{member}=B\left(Q\right)-C\left(q_i\right)+(k-1){\pi }_i(0,0)+(n-k){\pi }_i(t,t)$$

(12)

$${\pi }_i^{non}=B\left(Q\right)+(n-1){\pi }_i(t,t)$$

(13)

In this context, $n$ represents the total number of countries. When Equations (12) and (13) are equal, it yields a value of $k$, which successfully transforms the prisoner’s dilemma of providing a public good, such as emission reductions, into a tipping game with a critical threshold: when the number of signatory countries exceeds $k$, the benefits of joining the agreement outweigh the benefits of defecting. Barrett [45] states that merely threatening to implement trade restrictions is enough to ensure the implementation of the agreement. He argues that, if the threat is credible and the corresponding penalties are severe enough, there is no need to actually impose the trade restrictions. In his subsequent research, Barrett uses the above model for a theoretical analysis and conducted experiments, demonstrating that multilateral trade linkages can ensure the success of the agreement by setting an activation threshold for the agreement. Hagen and Schneider [19] also build upon this model to explore trade sanctions and the retaliation behavior of non-signatory countries. They find that trade sanctions are effective in large-scale climate coalitions, and considering the retaliation of non-signatory countries, the United States and Europe are indispensable members for ensuring the stability of the agreement.

The macro-perspective, based on national interests, often overlooks the market impacts brought about by trade reciprocity. In contrast, another strand of literature takes a more detailed approach by considering the effects of trade reciprocity policies on the import and export of goods in the trade market. This type of research typically starts from microeconomic entities, namely consumers and producers, where national welfare is determined by the utility function and the pollution damage function. Suppose a country produces two products: clean goods $x$ and pollution goods $e$. The utility function is represented by $U$, and the damage function by $D$. The model is expressed as follows.

$${\pi }_i=U\left(x_i^D,e_i^D\right)-D_i(e_1^D,\dots ,e_n^D)$$

(14)

where $x_i^D$ represents the demand for clean goods in country $i$ and $e_i^D$ represents the demand for pollution goods. Equation (14) is determined by the demand for goods, and deriving the optimal demand requires considering both producer and consumer behavior. Therefore, models in this type of research are typically complex and difficult to obtain analytical solutions for, and numerical simulation methods are often used for analyses.

The literature focusing on trade markets is not as extensive as the research from a macro-perspective, but it still generates considerable discussion. These studies have demonstrated that the introduction of trade incentive policies serves as an effective mechanism for forming climate coalitions, leading to larger alliances and welfare levels that are no lower than the business-as-usual scenario [73,74,75,76,77] (Some studies have also shown that the inclusion of trade incentive policies only slightly improves global welfare [73]. After trade linkage, the welfare levels of cooperating and non-cooperating coalitions tend to converge. However, the implementation of trade linkage does not negatively impact global welfare overall).

Trade linkages have long been a key research focus, and they represent one of the promising approaches to improving the structure of IEA cooperation. In fact, trade linkages have been widely used in environmental agreements. The Montreal Protocol is a well-known example, incorporating trade restrictions between member and non-member countries. However, the success of the Montreal Protocol resulted from multiple factors, and the specific contribution of trade linkages remains unclear.

Nevertheless, trade linkages remain one of the most promising approaches. Although there is no fully successful case of a climate club based on trade discrimination, the concept has increasingly entered the agenda of international environmental negotiations. A recent example is the G7 Climate Club established in 2022. While a unified external policy has yet to be implemented, carbon border adjustment mechanisms (CBAMs) are under consideration, with the EU having proposed such a measure in 2021.

CBAMs are regarded not only as an environmental policy but also as a catalyst for sustainable development [78]. The existing literature presents mixed views on its effectiveness. On the one hand, CBAMs do contribute to emission reductions, though the impact is limited. Some studies have highlighted significant variation across sectors [79], while others have found that the EU’s CBAM would reduce global emissions by only 0.08% [80]. On the other hand, concerns have been raised about the policy’s unequal impact on third countries. Böhringer et al. [81] show that, although CBAMs help reduce carbon leakage, they may significantly exacerbate regional inequality. Similarly, Eicke et al. [82] note that the policy’s global effects are unevenly distributed, with the highest risks concentrated in African countries.

As one of the tools to prevent carbon leakage within climate clubs, CBAMs still have significant space for improvement. Meanwhile, the club itself continues to face both achievements and challenges. In 2024, the G7 climate leaders announced in Turin, Italy, that member countries would phase out coal-fired power plants by 2035 [83]. However, recognizing the historical and economic dependence on coal in some countries, the implementation standards have been relaxed for Japan and Germany [84]. This undoubtedly makes the already-urgent goal of limiting global warming to 1.5 °C by 2030 even less attainable.

As a relatively new approach, climate clubs have few practical examples, and research on their benefits, carbon leakage mitigation, and future development remains limited. Addressing these gaps may become a key trend in future studies on international environmental cooperation.

Apart from issue linkage, altering the number of alliances is another popular approach. Specifically, rather than having all countries cooperate under a single large-scale agreement, this line of research favors dividing the grand coalition into multiple alliances that operate separately. The models in these studies remain consistent with the basic framework, differing only in how the total welfare or benefits are aggregated based on the number of alliances. Thus, we will not repeat the details here.

Among the attempts to alter the number of alliances, one of the most representative studies is the regional penance strategy proposed by Asheim et al. [22]. They divide a large coalition into two regions, where defection within a region is punished only by the countries within that region, without affecting cooperation in the other region. Using a repeated game framework, they demonstrated the effectiveness of this regional cooperation approach. Building upon their work, Takashima [85] further explores cooperative structures involving multiple alliances and proved that, if the discount factor exceeds 1/2, this form of cooperation can be sustained.

It can be observed that successful environmental agreements with over a hundred countries are rare, while many regional agreements with fewer members have succeeded (Examples include the Convention on the Protection of the Marine Environment of the Baltic Sea Area (which entered into force in 1980) and the Convention for the Protection of the Mediterranean Sea Against Pollution (which entered into force in 1978)). As Barrett [2] notes, there is a trade-off between membership size and agreement efficiency. However, global issues such as climate change cannot be resolved by regional efforts alone. Although multiple agreements may improve cooperation, how obligations should be allocated among them, especially given regional differences in climate impacts, and whether this is more effective than a single large agreement remains to be studied.

Overall, the existing literature has extensively explored modifications to cooperation structures to promote stable international collaboration. Among these, trade-linked climate clubs have emerged as the most frequently discussed and promising new approach. However, while numerous studies have highlighted the benefits of trade linkages, trade sanctions pose potential conflicts with international trade rules. Such sanctions not only harm the targeted countries but may also lead to losses for sanctioning nations themselves. To ensure that this approach genuinely enhances welfare, further research is needed to better understand the mechanisms through which trade sanctions affect national markets and overall welfare.

2.4. Future of IEAs

Thus far, we have summarized recent research focuses on IEAs. This section offers a discussion on the future prospects of IEAs.

In examining the evolving landscape of international environmental cooperation, several key trends are beginning to take shape. Drawing on recent developments in the field, three main trends can be identified in the future development of IEAs: innovation in cooperation frameworks that combine incentives with enforcement; the increasing involvement of diverse stakeholders; and the growing importance of aligning environmental governance with global political and economic structures.

It is evident that, for both researchers and negotiators, the foremost expectation lies in establishing a regulatory framework capable of accommodating countries with diverse interests. Such a framework must incorporate both incentives and enforcement mechanisms, effectively balancing benefits and regulations. Exploring and testing various potentially effective regulatory frameworks will be a major focus for the future of IEAs.

Additionally, in the context of contemporary global economic integration and the diversification of economic actors, the scope of participants involved in international environmental cooperation has expanded beyond nation-states alone. Unlike the early phase of environmental cooperation negotiations, which were largely limited to regional multilateral agreements among states, there is now a pronounced trend toward a broader array of stakeholders involved in and affected by IEAs. These stakeholders encompass states, international organizations, non-governmental organizations (NGOs), and business entities.

Since the adoption of the Kyoto Protocol, the role of major powers in international environmental cooperation has received renewed emphasis. This includes not only the traditionally dominant actors such as the US and the EU, but also the increasingly influential emerging economies, notably China and India. The participation of these countries is pivotal to the success or failure of an IEA. Beyond nation-states, the role of international organizations has gained growing recognition in recent years. Entities such as the World Bank, WTO and the International Monetary Fund (IMF) play important supportive roles in advocating for environmental cooperation. Meanwhile, NGOs and business groups exert pressure on governments to advance environmental agendas.

In recent years, the influence of these actors on IEA negotiations has become increasingly significant. It is important to note, however, that their impact is not always positive. For instance, the US has both ratified and withdrawn from the Kyoto Protocol, while corporations can act either as leaders in developing renewable sources or as obstacles resisting the phase-out of fossil fuels. These actors can therefore play markedly different roles depending on the context. Moving forward, a key focus of international environmental cooperation will be on how to harness the diverse actors to maximize their constructive contributions.

Negotiations on IEAs are ongoing, with the annual COP consistently drawing global attention and becoming focal points in public discourse. A historical review reveals that while successful IEAs do exist, they tend to be exceptional cases. IEAs are not agreements on a single issue but rather an umbrella term covering multiple critical environmental challenges, including biodiversity loss, marine pollution, and air pollution. It remains uncertain which of the currently implemented IEAs will ultimately succeed. What is clear, however, is that future negotiations must focus on the roles of diverse stakeholders. As international environmental cooperation evolves, the ability to design inclusive, flexible, and enforceable cooperation frameworks that engage a wide array of stakeholders will be central to the future success of IEAs.

2.5. Beyond IEAs: Alternative Solutions

So far, we have reviewed and discussed research on promoting cooperation IEAs as well as future trends. However, international environmental cooperation is not limited to IEAs. This section summarizes several widely discussed alternative approaches that have emerged alongside IEAs and are regarded as means to reduce global pollution emissions.

Apart from IEAs, carbon-pricing instruments are among the most widely discussed measures, with two main forms: border carbon adjustments (BCAs) and emissions trading schemes (ETSs).

BCAs refer to a tariff-adjustment mechanism designed to address the externalities of carbon emissions. When high-emission goods are exported from countries with lower carbon taxes to those with higher carbon taxes, an adjusted tariff is imposed. In terms of modeling, research on BCAs has primarily focused on micro-level entities, such as consumers and producers, with welfare functions typically expressed as follows:

$${\pi }_i={CS}_i+{PS}_i+T_i-D_i+{BCA}_i$$

(15)

Here, ${CS}_i$ represents the consumer surplus, ${PS}_i$ represents the producer surplus, $T_i$ denotes the tax revenue collected by the country, $D_i$ represents the damage function from pollution, and ${BCA}_i$ stands for the adjusted export tariff. These functions are all determined by production levels and tariff rates, with BCA typically being adjusted based on the tariff levels of both the exporting and importing countries. Specifically, let $t_i$ represent the domestic tax rate, $t_j$ represent the foreign tax rate, and $X$ denote the global production of polluting goods. The carbon tax adjustment is often expressed in the following form:

$${BCA}_i=\left\{\begin{array}{c}\left(t_i-t_j\right)X,t_i>t_j\\ 0, t_i\le t_j\end{array}\right.$$

(16)

To date, carbon emission taxes have been widely implemented in many countries, particularly in European nations such as Finland, the Netherlands, Norway, and Denmark, which introduced these taxes as early as the 1990s. The effectiveness of this measure has been explored by numerous researchers. For instance, Elboghdadly and Finus [86] endorse BCAs, demonstrating through a stage-game model that the adoption of BCAs can reduce global carbon emissions and enhance global welfare.

However, while BCAs contribute to emission reduction, some researchers argue that their impact on the stability of existing agreements is not always positive. Baksi and Ray Chaudhuri [87] examine the effect of BCAs on the stability of IEAs and found that their introduction could, in fact, destabilize otherwise stable large coalitions. Although BCAs may be effective in mitigating emissions, how to integrate them effectively into environmental cooperation agreements remains an open question.

Another approach to adjusting carbon pricing is the emissions trading scheme (ETS). However, despite the praise for the EU ETS since its inception in 2005 as the first transnational greenhouse gas cap-and-trade system, ETSs have been more controversial than BCAs. In essence, an ETS involves allocating pollution quotas to countries, allowing the market to set prices for these quotas. Countries with a surplus or deficits in quotas can buy or sell them at market prices, effectively putting a price on carbon emissions and allowing them to be traded freely. Since ETSs have been implemented in various countries such as the EU, South Korea, and China, there is a wealth of real-world data that provide a solid foundation for analyses. Research on ETSs often employs a combination of empirical and theoretical approaches.

From a modeling perspective, the research on ETSs still starts from the micro-level, similar to the welfare models used for BCAs. The pricing mechanism for carbon emissions is typically represented by the maximization of a welfare function. Specifically, the price of pollution quotas, $\tau$, can be expressed in the following form.

$$\tau ={\displaystyle \frac{\partial {\pi }_i(p,h,z)}{\partial z}}$$

(17)

In the equation, $p,h, and z$ represent the prices of goods, human capital, and emission quotas, respectively. Equation (17) reflects the demand for pollution by the private sector and represents the value of pollution quotas.

Many studies consider emissions trading systems (ETSs) to be the most economically efficient measure for reducing GHGs [88,89,90]. A 2024 research report by the European Central Bank, based on data from 2003 to 2019, found that the EU ETS neither caused significant carbon leakage nor reduced economic activity. Using statistical machine learning methods, Biancalani et al. [91] provide empirical evidence that ETSs have led to a substantial reduction in CO₂ emissions, estimating a 15.4% decrease in the total emissions of ETS-implementing EU countries from 2005 to 2020 compared to a counterfactual scenario without ETSs. However, alongside these positive assessments, several studies have raised doubts about the system’s effectiveness. Scholars have criticized ETSs from a sector-specific perspective; for instance, Lagouvardou and Psaraftis [92] examine the inclusion of maritime shipping and highlighted potential adverse effects, such as carbon leakage, revenue loss from allowance trading, and negative impacts on ports within the European Economic Area. Others have taken an even more skeptical stance toward ETSs, arguing that they represent an inefficient system, leading to increased complexity and even potentially negative effects on emission reduction, and thus, they strongly oppose ETSs [93,94].

The combination of carbon-pricing instruments has already been adopted in several countries. In practice, the choice between carbon taxes and ETSs is often not exclusive. For instance, the UK introduced a Carbon Price Support in 2013 to complement both the EU ETS and the UK electricity sector’s ETS. In Sweden, emissions from the power and industrial sectors are covered by the EU ETS, yet the country has maintained a carbon tax since the late 1990s. Similarly, since 2019, Canada has implemented both a carbon tax and an ETS, with some provinces subject to both pricing instruments [95].

Empirical evidence supports the effectiveness of combining different carbon-pricing instruments. Jia et al. [96] use a case study of China to demonstrate the complementary effects of BCAs and ETSs, showing that their integration yields both economic and environmental benefits. Döbbeling-Hildebrandt et al. [97] provide a more comprehensive overview through a meta-analysis of 21 carbon-pricing mechanisms, including BCAs and ETSs, confirming the effectiveness and current practices of combining such instruments. As research on the integration of carbon-pricing approaches continues to expand, developing constructive insights into how to optimize their synergies has become an increasingly important direction in the recent literature.

Beyond carbon pricing, supply-side measures targeting fossil fuel production have attracted growing attention. Asheim et al. [98] and Newell and Daley [99] highlight the importance of ensuring long-term effectiveness without causing adverse economic or political effects when using supply-side measures. The key concerns include potential price increases triggering new investments, the limited availability of alternatives, and the need for adequate policy safeguards.

Implementing supply-side measures also faces significant challenges, particularly in relation to international politics and equity. As discussed in Section 2.3, many countries, especially developing ones, are historically and economically reliant on fossil fuels. The trade-off between emission reductions and development opportunities may raise fairness concerns. Heras [100] warns that the legitimate right to development (RtD) may be instrumentalized to defend the status quo fossil fuel regime, further complicating supply-side action. In response, scholars have proposed institutional solutions, such as the Fossil Fuel Non-Proliferation Treaty [101,102], and initiatives such as the Powering Past Coal Alliance (PPCA) and the Beyond Oil and Gas Alliance (BOGA) [103,104]. Linking climate governance with debt relief has also been widely discussed [105,106].

However, given the development needs of developing countries and the limited accessibility of alternative energy, reducing fossil fuel production remains a major challenge. In this context, emerging economies such as China and Brazil, which are capable of shaping norms around fossil fuel phase-out, are expected to act as key agents of change [100]. How to effectively incentivize their engagement remains an open question for future research.

To address the question of how to cope with the environmental crisis, experts from various fields have proposed different solutions. While these solutions may differ, one thing remains consistent: the need for global action. Even if environmental crises can be mitigated by adjusting tariffs between countries, trading emission allowances, or even using geoengineering [20,72], how to promote long-term environmental cooperation among countries remains an issue that needs to be explored.

3. Summary and Discussion

This study has classified and introduced several highly discussed recent studies and corresponding models on international cooperation to address cross-border pollution issues, based on the characteristics of the research subjects. To facilitate clearer and more convenient access to the research categories, main conclusions, and policy implications summarized in this paper,

Table 4. Summary of representative literature by theme.

Theme	Research Focus	Representative Study		Dominant Conclusion	Policy Implication
		Author	Modeling Approach
Player Characteristics	Ancillary Benefits	Ekins (1996); Finus and Rübbelke (2013) [39,40,43]	Theoretical Analyses	Emission reduction measures can bring ancillary benefits to the country. Effective punishment mechanisms are needed.	Strengthening enforcement and incentive mechanisms is advised to fully leverage the ancillary benefits associated with abatement efforts.
	Adaptation	Wilbanks et al. (2003); Barrett (2020) [44,45]	Theoretical Analyses	Enhancing a country’s capacity to adapt to environmental change does not reduce its willingness to participate in the agreement.	Supporting countries, particularly low- and middle-income nations, in improving their capacity to adapt to environmental change contributes to more stable and sustained international cooperation.
	Uncertainty in Benefits	Francisco J. Andre et al. (2024); Bruno Nkuiya (2020) [38,46]	Theoretical Analyses	The pursuit of higher participation levels should not lead to prioritizing research collaboration over emission reduction cooperation.	In promoting broader participation, equal attention should be given to both abatement efforts and scientific cooperation. The sharing of research outcomes should be encouraged.
Player Characteristics	Stock Pollution	Dockner and Long (1993); Fujita (2003) [47,48]	Theoretical Analyses	Uncertainty and the complexity of models significantly affect the prospects for long-term cooperation.	Communication and cooperation among countries play a crucial role in implementing emission reduction measures more effectively. Policy designs should place emphasis on the feasibility of implementing complex and dynamic strategies.
Cooperation Mechanism	Financial Transfer	Eyckmans and Finus (2006) [53]	Theoretical Analyses	Both external and internal financial transfers have a positive effect on the stability of the alliance.	Encouraging diversified financial support is recommended to improve the effectiveness of cooperation.
	Refunding	Fischer (2011); Cathrine Hagem et al. (2020) [57,60]	Theoretical Analyses	A refunding scheme alleviates the impact of the original tax system and allows firms to maintain normal production.	Designing an appropriate refund scheme can promote participation from both governments and businesses in abatement.
	Asymmetry	McGinty (2007); Finus, M. and McGinty, M. (2019) [65,70]	Theoretical Analyses	Asymmetry can bring returns to cooperation.	Encouraging the participation of heterogeneous countries in agreements by adjusting benefit-sharing arrangements can help leverage their roles within IEAs.
Cooperation Mechanism	Accidental Deviation	Takashima (2016) [24]	Theoretical Analyses	Renegotiation can prevent the social welfare loss caused by punishment in case of accidental deviation.	Countries that are unable to meet their emission reduction targets in the short term due to natural disasters or other unforeseen circumstances should be afforded appropriate flexibility and understanding.
	Altruism	van der Pol et al. (2012) [67]	Theoretical Analyses	Altruism can support the success of international climate agreements.	Countries should be encouraged to adopt an altruistic approach in climate policymaking, with global collective benefits being emphasized over unilateral national gains.
Cooperation Structure	Trade Linkages	Nordhaus (2015); Barrett (2020) [14,45]	Theoretical and Empirical Analyses	Trade sanctions are effective in large-scale climate coalitions.	Incorporating trade sanctions within the climate cooperation framework is suggested as a means to deter and incentivize non-compliance; however, careful consideration is required in designing such mechanisms.
	Multiple Alliances	Asheim et al. (2006); Takashima (2021) [22,85]	Theoretical Analyses	Multiple coalitions can achieve higher efficiency compared to a single unified coalition.	Multi-regional environmental cooperation could be considered to improve the overall efficiency.
Cooperation Structure	Carbon Border Adjustment Mechanisms	Böhringer et al. (2012); Eicke et al. (2021) [81,82]	Empirical Analyses	CBAMs can lead to emission reductions, but the effect is not significant.	The further refinement of CBAM designs and enforcement guidelines is advised, with consideration given to their integration alongside other emission reduction measures.
Beyond IEAs	Carbon-Pricing Instruments	Elboghdadly and Finus (2022); Biancalani et al. (2024) [86,91]	Empirical Analyses	Carbon-pricing instruments lead to benefits but have limitations; combining approaches can enhance the efficiency.	A comprehensive approach employing carbon taxes, emission trading, and subsidies is advised to capitalize on the unique strengths of each instrument.
	Supply-Side Measures	Heras (2024); Newell et al. (2022) [100,101]	Empirical Analyses	Reducing fossil fuel production requires institutional support to overcome challenges. Key developing countries should take a leading role in the phase-down process.	Accelerating alternative energy development and improving accessibility is essential. Key developing countries ought to be encouraged to undertake industrial transformation and strengthen their accountability in contributing to global environmental progress.

presents a summary table of this review for quick reference.

Countries are heterogeneous, and the excessive GHGs that accumulate over the years cannot be completely purified by nature, leading to a persistent stock. Today’s environmental crisis largely stems from the early-developed, economically flourishing nations. Therefore, the allocation of emission reduction obligations between developed and developing countries has always been an unavoidable topic in discussions of international environmental cooperation. In existing IEAs aimed at mitigating GHGs, there have been examples of relaxing emission reduction obligations for developing countries. For instance, the Kyoto Protocol only imposed emission reduction obligations on developed countries, allowing developing countries to participate freely. However, this friendly approach did not achieve the anticipated outcomes, and the Paris Agreement, which encouraged heterogeneous countries to participate, replaced it. Unfortunately, the Paris Agreement has also failed to achieve the desired results.

This paper summarizes the most widely discussed and widely recognized feasible measures to promote international environmental cooperation, such as internal or external financial support, initial payments and refund systems, and climate clubs connected with trade systems. However, on the one hand, the progress of funding projects aimed at encouraging the participation of developing countries in environmental cooperation has not been optimistic. On the other hand, although the connection between environmental cooperation and trade has been recognized by some national leaders, it has not yet been effectively applied in IEAs to mitigate GHGs. Similarly, the concept of climate clubs is also acknowledged by most studies but has not yet been implemented. Transitioning from theory to practice takes time and carries risks, which also highlights the need for more in-depth and convincing research results for these new attempts.

In addition, by reviewing the relevant literature on international environmental cooperation, this study found a notable divergence between theoretical and empirical approaches. Overall, theoretical studies on IEAs are more prevalent than empirical ones, particularly in exploring issues related to international cooperation. In contrast, empirical research tends to focus more on economic impacts, such as the cost-effectiveness of GCFs or the economic effects of carbon pricing. While abstract theoretical models provide a convenient and intuitive framework for analyzing cooperation in IEAs, this remains a real-world issue that demands validation through data and concrete cases. Therefore, a greater emphasis on empirical studies, or an integration of empirical and theoretical approaches, may offer a more practically meaningful way to investigate international environmental cooperation.

The existing research on international environmental cooperation primarily addresses two issues: to what extent should humanity limit emissions, and how to maintain environmental cooperation among countries with different interests. Since 1975, Nordhaus has been searching for answers to the first question, and although research on this topic continues to advance, significant progress has already been made. The exploration of the second issue has become a focus in recent years and will continue to be in the future. Specifically, based on this review of recent studies, future research directions can be divided into two main directions.

The first direction focuses on how to sustain international environmental cooperation. Countries face asymmetric benefits and costs, with most developing nations still heavily reliant on fossil fuels. Although the existing literature has proposed various instruments, these tools still require refinement or even fundamental innovation. Important questions remain: How strong are the incentives provided by financial support? Does aid actually reach the countries in need, and is it effective? Will the participation of developing countries affect the stability of agreements? Do climate clubs with trade sanctions comply with WTO trade rules, and might these sanctions ultimately harm member countries? These questions merit both theoretical exploration and empirical investigation.

The second direction focuses on how to effectively incentivize emission reductions. Due to the externalities of pollution and mitigation, intervention by external mechanisms is necessary to provide effective incentives. Carbon pricing is the most widely discussed method. However, as noted in this study, the benefits are limited. Many countries currently implement multiple carbon-pricing instruments in combination, yet there is still a lack of policy guidance on how to integrate these mechanisms effectively and limited empirical evidence demonstrating improved outcomes from such integration. Since carbon pricing encompasses various approaches, identifying the most efficient instruments and suitable combinations, while proving their feasibility and replicability, represents a valuable direction for future research.

Although this study provides a focused synthesis of recent developments in IEA-related research within the field of economics, it does not aim to offer an exhaustive account of all relevant dimensions due to space constraints. The analysis is primarily centered on prominent thematic areas that have received substantial academic attention in recent years. Nonetheless, several important aspects remain underexplored in this review, such as rigorous assessments of the economic costs and benefits of emission reduction, cross-country comparisons of IEAs implementation outcomes and their differentiated impacts, as well as the broader implications of IEAs participation for domestic policy innovation and socio-economic development. Future studies and reviews may further explore these areas and help address the remaining gaps in this field.