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The Dynamics of Climate Agreements

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  • Bard Harstad

Abstract

I provide a novel dynamic model with private provision of public bads and investments in technologies. The analysis is tractable and the MPE unique. By adding incomplete contracts, I derive implications of and for international climate treaties. While the non-cooperative equilibrium is bad, short-term agreements are worse due to hold-up problems. A long-term agreement should be more ambitious if it is rela- tively short-lasting and the technological externality large. The length itself should increase in this externality. With renegotiation, the outcome is rst best. The technological externalities are related to trade agreements, making them strategic substitutes to climate treatie

Suggested Citation

  • Bard Harstad, 2009. "The Dynamics of Climate Agreements," Discussion Papers 1474, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1474
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    More about this item

    Keywords

    Dynamic private provision of public goods; dynamic common pool prob- lems; dynamic hold-up problems; incomplete contracts; time horizon of contracts; renegotiation design; climate change; climate agreements and trade agreements;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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