A Mechanism Design Approach to Climate-Change Agreements
We take a mechanism design perspective to investigate how environmental agreements should account for multilateral externalities, incentive compatibility, and voluntary participation by sovereign countries. The optimal mechanism involves a tradeoff between a free rider problem in the effort provision of participating countries and the necessity of inducing countries to ratify the agreement. This mechanism can be approximated by a simple menu with attractive implementation and robustness properties. Limits on enforcement and commitment might nevertheless hinder the performance of this menu, making the “business as usual” scenario more likely. Link to the article
MARTIMORT, D. and SAND-ZANTMAN, W. (2016). A Mechanism Design Approach to Climate-Change Agreements. Journal of the European Economic Association, 14(3), pp. 669-718.
Keywords : #D82, #Asymmetric-and-Private-Information, #Mechanism-DesignH23, #Externalities, #Redistributive-Effects, #Environmental-Taxes-and-SubsidiesQ54, #Climate, #Natural-Disasters, #Global-Warming