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Participation and Duration of Environmental Agreements

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  • Marco Battaglini
  • Bård Harstad

Abstract

We analyze participation in international environmental agreements (IEAs) in a dynamic game where countries pollute and invest in green technologies. If complete contracts are feasible, participants eliminate the hold-up problem associated with their investments; however, most countries prefer to free-ride rather than participate. If investments are non-contractible, countries face a hold-up problem every time they negotiate; but the free-rider problem can be mitigated and significant participation is feasible. Participation becomes attractive because only large coalitions commit to long-term agreements that circumvent the hold-up problem. Under well-specified conditions even the first-best outcome is possible when the contract is incomplete. Since real-world IEAs fit in the incomplete contracting environment, our theory may help explaining the rising importance of IEAs and how they should be designed.

Suggested Citation

  • Marco Battaglini & Bård Harstad, 2012. "Participation and Duration of Environmental Agreements," NBER Working Papers 18585, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:18585
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    Cited by:

    1. Paul Pichler & Gerhard Sorger, 2016. "The value of commitment and delegation for the control of greenhouse gas emissions," Vienna Economics Papers 1604, University of Vienna, Department of Economics.
    2. Robert Schmidt & Roland Strausz, 2015. "On the Timing of Climate Agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(3), pages 521-547, November.
    3. Caparros, Alejandro & Finus, Michael, 2016. "Public Good Agreements under the Weakest-link Technology," Department of Economics Working Papers 58129, University of Bath, Department of Economics.
    4. repec:eee:eecrev:v:101:y:2018:i:c:p:418-440 is not listed on IDEAS
    5. Basak Bayramoglu & Michael Finus & Jean-François Jacques, 2016. "Climate Agreements in a Mitigation-Adaptation Game," Working Papers 2016.17, FAERE - French Association of Environmental and Resource Economists.
    6. Marco Battaglini & Bård Harstad, 2016. "The Political Economy of Weak Treaties," NBER Working Papers 22968, National Bureau of Economic Research, Inc.
    7. Mason, Charles F. & Polasky, Stephen & Tarui, Nori, 2017. "Cooperation on climate-change mitigation," European Economic Review, Elsevier, vol. 99(C), pages 43-55.
    8. Carlo Carraro, 2014. "International environmental cooperation," Chapters,in: Handbook of Sustainable Development, chapter 26, pages 418-431 Edward Elgar Publishing.
    9. Tiziano Distefano & Simone D'Alessandro, 2018. "An Evolutionary Approach to International Environmental Agreements," SEEDS Working Papers 0418, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Mar 2018.
    10. Rodrigo Harrison & Roger Laguno ff, 2013. "Dynamic Mechanism Design for a Global Commons," Levine's Working Paper Archive 786969000000000831, David K. Levine.
    11. Nils Chr. Framstad, 2014. "When can the environmental profile and emissions reduction be optimised independently of the pollutant level?," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 3(1), pages 25-45, March.
    12. repec:wly:iecrev:v:58:y:2017:i::p:751-782 is not listed on IDEAS
    13. Daron Acemoglu & Will Rafey, 2018. "Mirage on the Horizon: Geoengineering and Carbon Taxation Without Commitment," NBER Working Papers 24411, National Bureau of Economic Research, Inc.
    14. Harstad, Bård, 2016. "The market for conservation and other hostages," Journal of Economic Theory, Elsevier, vol. 166(C), pages 124-151.
    15. repec:oup:oxecpp:v:69:y:2017:i:2:p:345-364. is not listed on IDEAS
    16. Günther, Michael & Hellmann, Tim, 2017. "International environmental agreements for local and global pollution," Journal of Environmental Economics and Management, Elsevier, vol. 81(C), pages 38-58.
    17. Pichler, Paul & Sorger, Gerhard, 2018. "Delegating climate policy to a supranational authority: a theoretical assessment," European Economic Review, Elsevier, vol. 101(C), pages 418-440.
    18. Joungseok Park, 2016. "Rational Skeptics: On the Strategic Communication of Scientific Data," Working Papers 16-19, Department of Economics, Appalachian State University.

    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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