International Agreements and the Environment

This paper focuses upon the links between trade and the environment, and the use of trade policies to address environmental spillovers among countries. The paper emphasizes the existence of alternative forms of international cooperation, ranging from binding agreements to loose coordinating arrangements. A game theoretic model is developed to derive the conditions under which implicit cooperation may be as efficient in terms of environmental outcomes as a binding agreement. The reason for being interested in implicit cooperation is that the establishment of binding international agreements may prove costly and elusive. The search for international commitments can distract attention from the possibility of taking domestically-based action, and leave the environment worse-off.