Dynamic cooperation with tipping points in the climate system

Tipping points in the climate system can stabilize climate treaties; the stabilizing effect, however, often vanishes when the location of the threshold is uncertain. I demonstrate that in a dynamic setting, additional welfare gains can improve the prospects of cooperation. In the model, intertemporal efficiency gains result from abatement costs that are convex in each period. While non-cooperative countries tend to postpone their abatement efforts until the last minute as a result of the free-rider incentive, cooperation allows countries to allocate their abatement efforts efficiently over time. I show that cooperation often improves the outcome substantially, and arises endogenously in the model. In some cases, a ‘threshold-equilibrium’ emerges, where the stable coalition size is just large enough for the signatories to invest in avoiding the catastrophe.