Environmental and Resource Economics

, Volume 69, Issue 4, pp 837–851 | Cite as

Does a Clean Development Mechanism Facilitate International Environmental Agreements?

  • Kai A. Konrad
  • Marcel ThumEmail author


When politicians negotiate in international climate conventions they may suffer from incomplete information for each other’s preferences for reaching an agreement. As is known, this may cause failure to reach an efficient cooperative agreement. We study the role of cross border abatement provisions in the likelihood of such failure. For instance, the clean development mechanism was introduced in the context of the Kyoto Protocol to allow countries to make efficiency-enhancing use of cross-country low-cost mitigation opportunities. We use a simple bargaining framework to uncover why this mechanism may reduce the likelihood of reaching an efficient cooperative climate agreement.


Clean development mechanism International climate agreements Bargaining Incomplete information 

JEL Classification

Q54 Q58 F53 H41 


  1. Aresin S (2013) Cross border abatement and its welfare effects. In: Working paper of the Max Planck Institute for tax law and public finance, 2013-04. Available at SSRN: or doi: 10.2139/ssrn.2307821
  2. Barrett S (1994) Self-enforcing international environmental agreements. Oxf Econ Pap 46:878–894CrossRefGoogle Scholar
  3. Barrett S (1997) The strategy of trade sanctions in international environmental agreements. Resour Energy Econ 19(4):345–361CrossRefGoogle Scholar
  4. Barrett S (1998) On the theory and diplomacy of environmental treaty-making. Environ Resour Econ 11(3–4):317–333CrossRefGoogle Scholar
  5. Barrett S (2005) Chapter 28 - the theory of international environmental agreements. In: Mäler K-G, Vincent JR (eds) Handbook of Environmental Economics, vol 3. Elsevier, Amsterdam, pp 1457–1516Google Scholar
  6. Beccherle J, Tirole J (2011) Regional initiatives and the cost of delaying binding climate change agreements. J Public Econ 95(11–12):1339–1348CrossRefGoogle Scholar
  7. Bergstrom T, Blume L, Varian H (1986) On the private provision of public goods. J Public Econ 29(1):25–49CrossRefGoogle Scholar
  8. Böhringer Ch (2003) The Kyoto protocol: a review and perspectives. Oxf Rev Econ policy 19(3):451–466CrossRefGoogle Scholar
  9. Buchholz W, Konrad KA (1994) Global environmental problems and the strategic choice of technology. J Econ 60(3):299–321CrossRefGoogle Scholar
  10. Caparrós A, Péreau J-C (2013) Forming coalitions to negotiate north–south climate agreements. Environ Dev Econ 18(1):69–92CrossRefGoogle Scholar
  11. Caparrós A, Péreau J-C, Tazdait T (2004) North–South climate change negotiations: a sequential game with asymmetric information. Public Choice 121(3–4):455–480CrossRefGoogle Scholar
  12. Carbon Pulse (2016) Paris agreement rings in New Era of international carbon trading. Carbon Pulse, March 15, 2016.
  13. Carraro C, Siniscalco D (1993) Strategies for the international protection of the environment. J Public Econ 52(3):309–328CrossRefGoogle Scholar
  14. Chatterjee K, Samuelson W (1983) Bargaining under incomplete information. Oper Res 31(5):835–851CrossRefGoogle Scholar
  15. Courtois P (2010) International cooperation by mediation: the power of the chair. Rev Econ Polit 120(6):973–989Google Scholar
  16. Courtois P, Tazdait T (2014) Bargaining over a climate deal: deadline and delay. Ann Oper Res 220(1):205–221CrossRefGoogle Scholar
  17. Endres A (2014) Ein Grundsatzstreit spaltet den Klimagipfel. Die ZEIT Online, 20:21 CET, December 29, 2014
  18. Harstad B (2007) Harmonization and side payments in political cooperation. Am Econ Rev 97(3):871–889CrossRefGoogle Scholar
  19. Helm C (2003) International emissions trading with endogenous allowance choices. J Public Econ 87(12):2737–2747CrossRefGoogle Scholar
  20. Helm C, Wirl F (2014) The principal-agent model with multilateral externalities: an application to climate agreements. J Environ Econ Manag 67(2):141–154CrossRefGoogle Scholar
  21. Hoel M (1991) Global environmental problems: the effects of unilateral actions taken by one country. J Environ Econ Manag 20(1):55–70CrossRefGoogle Scholar
  22. Hoel M, Schneider K (1997) Incentives to participate in international environmental agreements. Environ Resour Econ 9(2):153–170Google Scholar
  23. Hong F (2014) Technology transfer with transboundary pollution: a signalling approach. Can J Econ 47(3):953–980CrossRefGoogle Scholar
  24. Konrad KA, Thum M (2014) Climate policy negotiations with incomplete information. Economica 81:244–256CrossRefGoogle Scholar
  25. Lange A, Vogt C (2003) Cooperation in international environmental negotiations due to a preference for equity. J Public Econ 87(9–10):2049–2067CrossRefGoogle Scholar
  26. Martimort D, Sand-Zantman W (2013) Solving the global warming problem: beyond markets, simple mechanisms may help!. Can J Econ 46(2):361–378CrossRefGoogle Scholar
  27. McGinty M (2007) International environmental agreements among asymmetric nations. Oxf Econ Pap 59(1):45–62CrossRefGoogle Scholar
  28. Myerson RB, Satterthwaite MA (1983) Efficient mechanisms for bilateral trading. J Econ Theory 29(2):265–281CrossRefGoogle Scholar
  29. Paulsson E (2009) A review of the CDM literature: from fine-tuning to critical scrutiny? Int Environ Agreem Politics Law Econ 9(1):63–80CrossRefGoogle Scholar
  30. Wangler L, Altamirano-Cabrera J-C, Weikard H-P (2013) The political economy of international environmental agreements: a survey. Int Environ Agreem Politics Law Econ 13(3):387–403CrossRefGoogle Scholar
  31. Weikard H-P, Dellink R, van Ierland E (2010) Renegotiations in the Greenhouse. Environ Resour Econ 45(4):573–596CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2017

Authors and Affiliations

  1. 1.Max Planck Institute for Tax Law and Public FinanceMunichGermany
  2. 2.Faculty of Business and EconomicsTU DresdenDresdenGermany

Personalised recommendations