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Dynamic cooperation with tipping points in the climate system

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  • Robert C. Schmidt

    () (Humboldt-Universitaet zu Berlin)

Abstract

Tipping points in the climate system can stabilize climate treaties; the stabilizing effect, however, vanishes when the location of the threshold is sufficiently uncertain (Barrett, 2013). We demonstrate that in a dynamic setting, additional welfare gains can improve the prospects of cooperation. In our 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. We show that cooperation often improves the outcome substantially, and arises endogenously in the model. Our main theoretical results are confirmed by experimental evidence.

Suggested Citation

  • Robert C. Schmidt, 2015. "Dynamic cooperation with tipping points in the climate system," Working Papers 2015018, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
  • Handle: RePEc:bdp:wpaper:2015018
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    References listed on IDEAS

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    1. Astrid Dannenberg & Andreas L�schel & Gabriele Paolacci & Christiane Reif & Alessandro Tavoni, 2011. "Coordination under threshold uncertainty in a public goods game," GRI Working Papers 64, Grantham Research Institute on Climate Change and the Environment.
    2. Lange, Andreas & Vogt, Carsten, 2003. "Cooperation in international environmental negotiations due to a preference for equity," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2049-2067, September.
    3. Tavoni, Alessandro & Dannenberg, Astrid & Löschel, Andreas, 2010. "Coordinating to protect the global climate: Experimental evidence on the role of inequality and commitment," ZEW Discussion Papers 10-049, ZEW - Leibniz Centre for European Economic Research.
    4. Michael Finus & Stefan Maus, 2008. "Modesty May Pay!," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(5), pages 801-826, October.
    5. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-894, Supplemen.
    6. Astrid Dannenberg & Andreas Lange & Bodo Sturm, 2014. "Participation and Commitment in Voluntary Coalitions to Provide Public Goods," Economica, London School of Economics and Political Science, vol. 81(322), pages 257-275, April.
    7. Barrett, Scott, 2013. "Climate treaties and approaching catastrophes," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 235-250.
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    Cited by:

    1. Eric Bahel, 2018. "Cooperation and Subgame Perfect Equilibria in Global Pollution Problems with Critical Threshold," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(2), pages 457-481, June.

    More about this item

    Keywords

    climate treaty; abatement; long-term commitment; cooperation; free-riding;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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