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International Environmental Agreements under Uncertainty: Does the Veil of Uncertainty Help?

  • Michael Finus

    (Department of Economics, University of Exeter)

  • Pedro Pintassilgo

    (Faculty of Economics, University of Algarve)

Na and Shin (1998) showed that the veil of uncertainty can be conducive to the success of self-enforcing international environmental agreements. Later papers confirmed this negative conclusion about the role of learning. In the light of intensified research efforts worldwide to reduce uncertainty about the environmental impact of emissions and the cost of reducing them, this conclusion is intriguing. The purpose of this paper is threefold. First, we analyze whether the result carries over to a more general setting without restriction on the number of players and which considers not only no and full learning but also partial learning. Second, we test whether the conclusion also holds if there is uncertainty about abatement costs instead of uncertainty about the benefits from global abatement. Third, we propose a transfer scheme that mitigates the possible negative effect of learning and which may even transform it into a positive effect.

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File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP1003.pdf
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Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 1003.

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Date of creation: 2010
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Handle: RePEc:exe:wpaper:1003
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  1. Michael Hoel, 1992. "International environment conventions: The case of uniform reductions of emissions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 2(2), pages 141-159, March.
  2. Barrett, Scott, 2001. "International cooperation for sale," European Economic Review, Elsevier, vol. 45(10), pages 1835-1850, December.
  3. Charles Kolstad, 2005. "Piercing the Veil of Uncertainty in Transboundary Pollution Agreements," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(1), pages 21-34, 05.
  4. Hans-Peter Weikard, 2005. "Cartel Stability under an Optimal Sharing Rule," Working Papers 2005.77, Fondazione Eni Enrico Mattei.
  5. Finus, Michael, 2008. "Game Theoretic Research on the Design of International Environmental Agreements: Insights, Critical Remarks, and Future Challenges," International Review of Environmental and Resource Economics, now publishers, vol. 2(1), pages 29-67, June.
  6. Matthew McGinty, 2007. "International environmental agreements among asymmetric nations," Oxford Economic Papers, Oxford University Press, vol. 59(1), pages 45-62, January.
  7. Carraro, Carlo & Siniscalco, Domenico, 1991. "Strategies for the International Protection of the Environment," CEPR Discussion Papers 568, C.E.P.R. Discussion Papers.
  8. Yi, Sang-Seung, 1997. "Stable Coalition Structures with Externalities," Games and Economic Behavior, Elsevier, vol. 20(2), pages 201-237, August.
  9. Charles Kolstad & Alistair Ulph, 2011. "Uncertainty, Learning and Heterogeneity in International Environmental Agreements," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 50(3), pages 389-403, November.
  10. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen.
  11. Fuentes-Albero, Cristina & Rubio, Santiago J., 2010. "Can international environmental cooperation be bought?," European Journal of Operational Research, Elsevier, vol. 202(1), pages 255-264, April.
  12. Hans-Peter Weikard & Juan-Carlos Altamirano-Cabrera & Michael Finus, 2004. "The Impact of Surplus Sharing on The Stability of International Climate Agreements," Working Papers 2004.99, Fondazione Eni Enrico Mattei.
  13. Johan Eyckmans & Michael Finus, 2004. "An Almost Ideal Sharing Scheme for Coalition Games with Externalities," Energy, Transport and Environment Working Papers Series ete0414, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
  14. Carsten Helm, 1998. "International Cooperation Behind the Veil of Uncertainty – The Case of Transboundary Acidification," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(2), pages 185-201, September.
  15. Oran R. Young, 2003. "Environment and Statecraft: The Strategy of Environmental Treaty-Making," Global Environmental Politics, MIT Press, vol. 3(1), pages 145-147, 02.
  16. Kolstad, Charles D., 2007. "Systematic uncertainty in self-enforcing international environmental agreements," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 68-79, January.
  17. EYCKMANS, Johan & FINUS, Michael, 2003. "Coalition formation in a global warming game : how the design of protocols affects the success of environmental treaty-making," CORE Discussion Papers 2003088, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  18. Francesco Bosello & Barbara Buchner & Carlo Carraro, 2003. "Equity, Development, and Climate Change Control," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 601-611, 04/05.
  19. Arce M., Daniel G. & Sandler, Todd, 2001. "Transnational public goods: strategies and institutions," European Journal of Political Economy, Elsevier, vol. 17(3), pages 493-516, September.
  20. Gollier, Christian & Treich, Nicolas, 2003. " Decision-Making under Scientific Uncertainty: The Economics of the Precautionary Principle," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 77-103, August.
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