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The Dynamics of Climate Agreements

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  • Bård Harstad

Abstract

I develop a dynamic model of private provision of public bads allowing investments in technologies. The analysis is tractable and the MPE unique. The framework is used to derive optimal incomplete contracts in a dynamic setting. While the noncooperative equilibrium is very inefficient, short-term contracts can be worse due to hold-up problems. The optimal long-term contract is more ambitious if its length is relatively short and the technological spillover large. The optimal length increases in this externality. With renegotiation, the outcome is first best. The results have several implications for how to design a climate treaty.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2962.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_2962

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Keywords: dynamic private provision of public goods; dynamic common pool problems; dynamic hold-up problems; incomplete contracts; contract-length; renegotiation design; climate change and climate agreements;

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References

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Citations

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Cited by:
  1. Robert Hahn & Robert Ritz, 2014. "Optimal Altruism in Public Good Provision," Cambridge Working Papers in Economics 1403, Faculty of Economics, University of Cambridge.
  2. Michael Jakob & Gunnar Luderer & Jan Steckel & Massimo Tavoni & Stephanie Monjon, 2012. "Time to act now? Assessing the costs of delaying climate measures and benefits of early action," Climatic Change, Springer, vol. 114(1), pages 79-99, September.
  3. Suzi Kerr & Adam Millard-Ball, 2012. "Cooperation To Reduce Developing Country Emissions," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 3(04), pages 1250023-1-1.
  4. May Elsayyad & Florian Morath, 2013. "Technology Transfers for Climate Change," CESifo Working Paper Series 4521, CESifo Group Munich.
  5. Michael Jakob & Kai Lessmann, 2012. "Signaling in international environmental agreements: the case of early and delayed action," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 12(4), pages 309-325, November.
  6. Thomas Norman & Heinrich H. Nax, 2011. "Leading the Way: Coalitional Stability in Technological Cooperation & Sequential Climate Policy," Economics Series Working Papers 585, University of Oxford, Department of Economics.
  7. Olivier Bos & Béatrice Roussillon & Paul Schweinzer, 2013. "Agreeing on Efficient Emissions Reduction," CESifo Working Paper Series 4345, CESifo Group Munich.

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