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International Environmental Agreements under Uncertainty: Does the Veil of Uncertainty Help?

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Author Info

  • Michael Finus

    (Department of Economics, University of Exeter)

  • Pedro Pintassilgo

    (Faculty of Economics, University of Algarve)

Abstract

Na and Shin (1998) showed that the veil of uncertainty can be conducive to the success of self-enforcing international environmental agreements. Later papers confirmed this negative conclusion about the role of learning. In the light of intensified research efforts worldwide to reduce uncertainty about the environmental impact of emissions and the cost of reducing them, this conclusion is intriguing. The purpose of this paper is threefold. First, we analyze whether the result carries over to a more general setting without restriction on the number of players and which considers not only no and full learning but also partial learning. Second, we test whether the conclusion also holds if there is uncertainty about abatement costs instead of uncertainty about the benefits from global abatement. Third, we propose a transfer scheme that mitigates the possible negative effect of learning and which may even transform it into a positive effect.

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File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP1003.pdf
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Bibliographic Info

Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 1003.

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Date of creation: 2010
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Handle: RePEc:exe:wpaper:1003

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Keywords: transnational cooperation; self-enforcing international environmental agreements; uncertainty; learning;

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References

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  1. Fuentes-Albero, Cristina & Rubio, Santiago J., 2010. "Can international environmental cooperation be bought?," European Journal of Operational Research, Elsevier, vol. 202(1), pages 255-264, April.
  2. Hans-Peter Weikard & Michael Finus & Juan-Carlos Altamirano-Cabrera, 2006. "The impact of surplus sharing on the stability of international climate agreements," Oxford Economic Papers, Oxford University Press, vol. 58(2), pages 209-232, April.
  3. Michael Hoel, 1992. "International environment conventions: The case of uniform reductions of emissions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 2(2), pages 141-159, March.
  4. Carraro, Carlo & Siniscalco, Domenico, 1991. "Strategies for the International Protection of the Environment," CEPR Discussion Papers 568, C.E.P.R. Discussion Papers.
  5. Charles Kolstad, 2005. "Piercing the Veil of Uncertainty in Transboundary Pollution Agreements," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(1), pages 21-34, 05.
  6. Gollier, Christian & Treich, Nicolas, 2003. "Decision-Making under Scientific Uncertainty: The Economics of the Precautionary Principle," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  7. Johan Eyckmans & Michael Finus, 2004. "An Almost Ideal Sharing Scheme for Coalition Games with Externalities," Working Papers 2004.155, Fondazione Eni Enrico Mattei.
  8. Kolstad, Charles D., 2007. "Systematic uncertainty in self-enforcing international environmental agreements," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 68-79, January.
  9. Oran R. Young, 2003. "Environment and Statecraft: The Strategy of Environmental Treaty-Making," Global Environmental Politics, MIT Press, vol. 3(1), pages 145-147, 02.
  10. Francesco Bosello & Barbara Buchner & Carlo Carraro, 2003. "Equity, Development, and Climate Change Control," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 601-611, 04/05.
  11. EYCKMANS, Johan & FINUS, Michael, 2003. "Coalition formation in a global warming game : how the design of protocols affects the success of environmental treaty-making," CORE Discussion Papers 2003088, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Arce M., Daniel G. & Sandler, Todd, 2001. "Transnational public goods: strategies and institutions," European Journal of Political Economy, Elsevier, vol. 17(3), pages 493-516, September.
  13. Hans-Peter Weikard, 2005. "Cartel Stability under an Optimal Sharing Rule," Working Papers 2005.77, Fondazione Eni Enrico Mattei.
  14. Matthew McGinty, 2007. "International environmental agreements among asymmetric nations," Oxford Economic Papers, Oxford University Press, vol. 59(1), pages 45-62, January.
  15. Yi, Sang-Seung, 1997. "Stable Coalition Structures with Externalities," Games and Economic Behavior, Elsevier, vol. 20(2), pages 201-237, August.
  16. Barrett, Scott, 2001. "International cooperation for sale," European Economic Review, Elsevier, vol. 45(10), pages 1835-1850, December.
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Cited by:
  1. Fuhai Hong & Susheng Wang, 2012. "Climate Policy, Learning, and Technology Adoption in Small Countries," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 51(3), pages 391-411, March.

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