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Agreeing on Efficient Emissions Reduction

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  • Olivier Bos
  • Béatrice Roussillon
  • Paul Schweinzer

Abstract

We propose a simple mechanism providing incentives to reduce harmful emissions to their efficient level without infracting upon productive efficiency. The mechanism employs a contest creating incentives among participating nations to simultaneously exert efficient productive and efficient abatement efforts. Participation in the most stylised form of the scheme is voluntary and individually rational; all rules are mutually agreeable and are unanimously adopted if proposed. The scheme balances its budget and requires no principal. In a perhaps more realistic stochastic output version which could potentially inform policy decisions, we show that the transfers required by the efficient mechanism create a mutual insurance motive which may serve as effective rationale for the (gradual) formation of International Environmental Agreements.

Suggested Citation

  • Olivier Bos & Béatrice Roussillon & Paul Schweinzer, 2013. "Agreeing on Efficient Emissions Reduction," CESifo Working Paper Series 4345, CESifo.
  • Handle: RePEc:ces:ceswps:_4345
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    Cited by:

    1. Bård Harstad, 2016. "The Dynamics Of Climate Agreements," Journal of the European Economic Association, European Economic Association, vol. 14(3), pages 719-752, June.
    2. Molina, Chai & Akcay, Erol & Dieckmann, Ulf & Levin, Simon & Rovenskaya, Elena A., 2018. "Combating climate change with matching-commitment agreements," SocArXiv 7yc3g, Center for Open Science.

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    More about this item

    Keywords

    climate policy; contests; agreements; efficiency;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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