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Solving the GlobalWarming Problem: Beyond Markets, Simple Mechanisms May Help!

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  • Martimort, David
  • Sand-Zantman, Wilfried

Abstract

This paper discusses the feasibility and performances of simple mechanisms to implement international environmental agreements in the multilateral externalities context of global warming. Asymmetric information and voluntary participation by sovereign and heterogenous countries are key constraints on the design of those agreements. Mechanisms must prevent two sorts of free-riding problems - free riding in effort provision and free riding in participation. As markets might fail to solve simultaneously those two problems, we construct instead a simple menu of options that trades off the provision of incentives for participating countries and the provision of incentives to participate.With such mechanism, all countries voluntary contribute to a fund, although at different intensities, but only the most efficient ones effectively reduce their pollution below its “business as usual” level.

Suggested Citation

  • Martimort, David & Sand-Zantman, Wilfried, 2012. "Solving the GlobalWarming Problem: Beyond Markets, Simple Mechanisms May Help!," TSE Working Papers 12-340, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:26340
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    References listed on IDEAS

    as
    1. Henry Tulkens & Parkash Chander, 1997. "The Core of an Economy with Multilateral Environmental Externalities," International Journal of Game Theory, Springer;Game Theory Society, vol. 26(3), pages 379-401.
    2. Guillaume Cheikbossian & Wilfried Sand-Zantman, 2011. "Dynamic Cooperation in Local Public Goods Supply with Imperfect Monitoring," Annals of Economics and Statistics, GENES, issue 101-102, pages 327-345.
    3. Parkash Chander & Henry Tulkens, 1995. "A core-theoretic solution for the design of cooperative agreements on transfrontier pollution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 279-293, August.
    4. repec:adr:anecst:y:2011:i:101-102:p:16 is not listed on IDEAS
    5. Martimort, David & Sand-Zantman, Wilfried, 2011. "A Mechanism Design Approach to Climate Agreements," IDEI Working Papers 682, Institut d'Économie Industrielle (IDEI), Toulouse, revised 30 Apr 2013.
    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Taking care of free-riders in global warming policies
      by Economic Logician in Economic Logic on 2012-11-14 21:26:00

    Citations

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    Cited by:

    1. Ngo Van Long, 2014. "The Green Paradox in Open Economies," CESifo Working Paper Series 4639, CESifo Group Munich.
    2. Martimort, David & Sand-Zantman, Wilfried, 2011. "A Mechanism Design Approach to Climate Agreements," TSE Working Papers 11-251, Toulouse School of Economics (TSE), revised 30 Apr 2013.
    3. Kai A. Konrad & Marcel Thum, 2014. "Does a Clean Development Mechanism Facilitate International Environmental Agreements?," Working Papers tax-mpg-rps-2014-20, Max Planck Institute for Tax Law and Public Finance.
    4. Helm, Carsten & Wirl, Franz, 2016. "Multilateral externalities: Contracts with private information either about costs or benefits," Economics Letters, Elsevier, vol. 141(C), pages 27-31.
    5. Alexey Kushnir & Shuo Liu, 2015. "On the equivalence of bayesian and dominant strategy implementation: the case of non-linear utilities," ECON - Working Papers 212, Department of Economics - University of Zurich.

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