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    Martimort, David and Sand-Zantman, Wilfried 2016. A MECHANISM DESIGN APPROACH TO CLIMATE-CHANGE AGREEMENTS. Journal of the European Economic Association, Vol. 14, Issue. 3, p. 669.

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  • Print publication year: 2005
  • Online publication date: February 2010

12 - Institution Design for Managing Global Commons: Lessons from Coalition Theory

Summary

Introduction

In many cases, environmental quality is a public good. When the dimension of the environmental problem is global, as in the case of global commons (climate change, ozone layer, biodiversity, etc.), there is no supranational authority that can enforce provision of the optimal amount of environmental quality. In this case, sovereign countries must decide whether or not to improve environmental quality – namely, to provide the environmental global public good – on a voluntary basis. In practice, countries negotiate on an international agreement that defines emission targets for each signatory and often the way to achieve these targets as well.

Early contributions (cf. Hardin and Baden 1977) characterized the interaction among countries as a prisoners' dilemma inevitably leading to the so-called tragedy of the global common property goods. However, in the real world, at the same time, many international environmental agreements on the commons were signed, often involving subgroups of negotiating countries and sometimes transfers and links with other policies (trade, technological cooperation, etc.).

How can we explain that some countries sometimes decide to sign an international environmental agreement even when they could enjoy the same environmental benefits by letting other countries abate? In other words, when the environment is a global public good, a country that does not abate achieves – without paying any costs – the same environmental benefits as signatories that decide to abate. Can it then be concluded that there is no incentive for countries to sign an international agreement – that is, that the outcome of the negotiation process will be a situation without any environmental cooperation?

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Group Formation in Economics
  • Online ISBN: 9780511614385
  • Book DOI: https://doi.org/10.1017/CBO9780511614385
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