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Solving the global warming problem: beyond markets, simple mechanisms may help!

  • David Martimort
  • Wilfried Sand-Zantman

This paper discusses the feasibility and performances of simple mechanisms to implement international environmental agreements in the multilateral externalities context of global warming. Asymmetric information and voluntary participation by sovereign and heterogeneous countries are key constraints on the design of those agreements. Mechanisms must prevent two sorts of freeriding problems free riding in effort provision and free riding in participation. As markets might fail to solve simultaneously those two problems, we construct instead a simple menu of options that trades off the provision of incentives for participating countries and the provision of incentives to participate . With such a mechanism, all countries voluntarily contribute to a fund, although at different intensities, but only the most efficient ones effectively reduce their pollution below its business as usual level.

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Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 46 (2013)
Issue (Month): 2 (May)
Pages: 361-378

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Handle: RePEc:cje:issued:v:46:y:2013:i:2:p:361-378
Contact details of provider: Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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  1. Martimort, David & Sand-Zantman, Wilfried, 2011. "A Mechanism Design Approach to Climate Agreements," TSE Working Papers 11-251, Toulouse School of Economics (TSE), revised 30 Apr 2013.
  2. Chander, Parkash & Tulkens, Henry, 1994. "A Core-Theoretic Solution for the Design of Cooperative Agreements on Transfrontier Pollution," Working Papers 897, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. CHANDER, Parkash & TULKENS, Henry, 1995. "The Core of an Economy with Multilateral Environmental Externalities," CORE Discussion Papers 1995050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Baliga, Sandeep & Maskin, Eric, 2003. "Mechanism design for the environment," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 7, pages 305-324 Elsevier.
  5. Cheikbossian, Guillaume & Sand-Zantman, Wilfried, 2008. "Dynamic Cooperation in Local Public Goods Supply with Imperfect Monitoring," IDEI Working Papers 527, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. Laffont, Jean-Jacques & Martimort, David, 2004. "The Design of Transnational Public Good Mechanisms for Developing Countries," IDEI Working Papers 267, Institut d'Économie Industrielle (IDEI), Toulouse.
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