Strategic International Agreement on Global Environment Management
When future international agreement on global environmental control is anticipated, decisions for controlling current carbon gas emissions by improving the country's abatement capabilities are strongly affected by the likelihood of such agreements as well as their probable outcome. We construct a two-period, two-country model where the quality of the atmospheric environment is a global public capital. Countries invest in abatement investments in the first period and engage in production activities in the second period. Applying the incomplete contract approach to this model where (re)negotiation with or without side payments may take place in the second period, we examine the following questions: What are the characteristics of countries that make their bargaining position more advantageous? What are the cause of distortions in ex ante capital investments as well as in ex post incentives for environmental improvement? What are the characteristics of countries that are prone to these distortions?
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- Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
- Miyazaki, Hajime, 1986. "Labor-Management Bargaining: Contract Curves and Slutsky Equations," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1225-45, December.
- Scott Barrett, 1994. "The biodiversity supergame," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 4(1), pages 111-122, February.
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