We investigate the effect of domestic politics on international environmental policy by incorporating into a classic stage game of coalition formation the phenomenon of lobbying by special-interest groups. In doing so, we contribute to the theory of international environmental agreements, which has overwhelmingly assumed that governments make decisions based on a single set of public-interest motivations. Our results suggest that lobbying on emissions may affect the size of the stable coalition in counterintuitive ways.

Investors and financial regulators are increasingly aware of climate-change risks. So far, most of the attention has fallen on whether controls on carbon emissions will strand the assets of fossil-fuel companies1, 2. However, it is no less important to ask, what might be the impact of climate change itself on asset values? Here we show how a leading integrated assessment model can be used to estimate the impact of twenty-first-century climate change on the present market value of global financial assets.

This important study by Nicholas Stern, the leading climate economist from Grantham Research Institute on Climate Change and Dr Simon Dietz from Centre for Climate Change Economics and Policy warns that the financial damage caused by global warming will be considerably greater than what the current models have predicted.

The global climate is changing, and will continue to do so even if greenhouse gas emissions are dramatically curbed. Economies are therefore faced with the challenge of adapting to climate change.