On Climate Agreements with Asymmetric Countries: Theory and Experimental Results

I model International climate agreements among asymmetric countries, each of whom must select a profile of CO2 emissions over time. Predictions from this model imply larger reductions by "large" countries, but larger proportional reductions by "small" countries. I then analyze experimental data that sheds light on this issue. In contrast to the theoretical predictions, I find that smaller countries do not reduce emissions proportionately to their Nash level, and so the burden falls mostly on larger countries. Moreover, combined emissions are indistinguishable from the one-shot Nash emissions. This pessimistic outcome extends the commonly-found result in the literature that negotiations in similar repeated games (but with symmetric players) generally do not offer much hope for meaningful agreements, unless the effects are modest. One possible explanation for this pattern of results is inequality aversion.