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Hope or Despair? Formal Models of Climate Cooperation

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Abstract

We review formal (and some more informal) models of climate cooperation derived from economics and political science. These models convey two main messages. On one hand, they suggest that the prospects for effective climate cooperation are bleak: The standard view is that stable coalitions are small and that renegotiation-proof equilibria require that only a few countries participate. On the other hand, there might be light at the end of the tunnel after all. First, more recent work suggests that larger coalitions can be made stable. Second, other recent work suggests that it may be possible to design a renegotiation-proof climate agreement with broad or even full participation. Third, deposit-refund systems might help solve some of the obstacles for effective climate cooperation. Fourth, although the “law of the least ambitious program” pinpoints severe constraints on effective cooperation, this law has its limits. Fifth, countries may use cooperative probes to build trust. Sixth, cooperation might emerge in a completely decentralized fashion. Finally, experiments indicate that some of the conditions for effective cooperation that are taken for granted in most formal models might in fact be overly strict.

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Notes

  1. This article is a revised and significantly expanded version of Grundig et al. (forthcoming).

  2. For a recent discussion of the notion of a self-enforcing agreement, see Grundig et al. (2012).

  3. Most existing models (of both types) picture countries as unitary actors. Notable exceptions include Dietz et al. (2012) and Ward et al. (2001).

  4. Finus and Rundshagen (2009) distinguish and consider the effects of six different rules for coalition formation.

  5. In some models nonparticipating countries independently choose their abatement levels in stage three (e.g. Barrett 2005; Nyborg 2014).

  6. Several extensions and modifications of the basic model generate more optimistic predictions; see Sect. 3.1.

  7. This idea resembles Victor’s (2011) idea of a “carbon club”.

  8. A similar conclusion is reached by Asheim et al. (2006), using a repeated-game framework (see Sect. 3.2).

  9. This conclusion is also supported by Gilligan (2004). Using a multilateral bargaining model, he shows that such a trade-off does not exist for a wide class of cooperation problems. Gilligan traces the hypothesized broader-deeper trade-off to the assumption that the participating countries must fix their policies at an identical level. In his model, when the multilateral agreement permits the participating countries to fix their policies at different levels, the broader-deeper trade-off ceases to exist.

  10. This subsection draws extensively on Hovi and Underdal (2014).

  11. For an application to a climate agreement based on carbon taxes, see Gersbach (2006) and Gersbach and Winkler (2007).

  12. The Commission claims significant short-term economic benefits for the EU.

  13. For an excellent informal account of the emergence of climate policy in the United States, see Rabe (2004).

  14. On the other hand, using a coalition model Finus and Rübbelke (2013) find that ancillary benefits do not enhance the prospects of an efficient global climate agreement. Countries taking private ancillary benefits into account will reduce their emissions irrespective of whether an international agreement exists. Thus, when some countries take ancillary benefits into account, other countries will have weaker incentives to join the agreement than they would have if no countries were to take such effects into account.

  15. This and the next few paragraphs draw extensively on Aakre et al. (2014).

  16. Other ideas involving lumpiness have been studied experimentally by McEvoy (2009).

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Authors and Affiliations

  1. Department of Political Science, University of Oslo, P.O. Box 1097, Blindern , 0317, Oslo, Norway

    Jon Hovi

  2. Department of Government, University of Essex, Wivenhoe Park, Colchester, Essex , CO4 3SQ, UK

    Hugh Ward

  3. School of Politics and International Relations, Rutherford College, University of Kent, Canterbury, Kent , CT2 7NX, UK

    Frank Grundig

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Hovi, J., Ward, H. & Grundig, F. Hope or Despair? Formal Models of Climate Cooperation. Environ Resource Econ 62, 665–688 (2015). https://doi.org/10.1007/s10640-014-9799-3

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