(Self-) Enforcement of Joint Implementation and Clean Development Mechanism Contracts
AbstractInternational climate protection investments (Joint Implementation and Clean Development Mechanism projects) are burdened with problems of contract enforcement, which prevent the realisation of efficiency gains associated with these investments. The paper analyses this problem from the perspective of non-cooperative game theory and proposes two different solutions to the co-operation problem. The first analyses the potential role of national environmental authorities in facilitating credible commitment of the project host operating under its jurisdiction. It is argued that the threat of punishing the project host if he breaches the contract may serve this purpose. The effective level of punishment is derived. The second option involves strategic delegation of contract implementation to a third party operating under the same jurisdiction as the project host. Again, the paper explores the conditions that ensure incentive-compatibility. Both options are based on the idea that the project sponsor may commit himself credibly by becoming a Stackelberg leader.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 1999.14.
Date of creation: Feb 1999
Date of revision:
Joint Implementation; Clean Development Mechanism; climate protection; international environmental agreements; international investments; contract enforcement; co-operation; incentive compatibility;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
- F20 - International Economics - - International Factor Movements and International Business - - - General
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
- K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-06-08 (All new papers)
- NEP-ENE-1999-06-08 (Energy Economics)
- NEP-ENV-1999-06-08 (Environmental Economics)
- NEP-LAW-1999-06-08 (Law & Economics)
- NEP-MIC-1999-06-08 (Microeconomics)
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