The Allocation of International Environmental Commodities

Abstract

The increasing relevance of cross - Dborder environmental issues is mirrored in the quest for effective allocation mechanisms for international environmental commodities.Cost sharing agreements such as the commitments of the Kyoto Protocol are predominant “mechanisms”. For strategic goals the negotiations, which precede these international agreements, are gaining increasing importance. For example, a country might want to help or motivate others to participate effectively in activities to reduce cross-border environmental pollution. In contrast to the classical principal-agent approach not so much the unobservable effort of the agent is the main obstacle to an efficient outcome, as the question of appropriate instruments to achieve the goal. This chapter will therefore investigate tools in this context and analyze their practical relevance. After a brief survey on the role of international environmental agreements as allocation mechanism, the principal-agent approach will be used to investigate stable and efficient allocations resulting from international negotiations. Mitigation strategies and adaptation strategies regarding climate change will be addressed in particular.