Stabilizing International Environmental Agreements

Abstract

This chapter models international environmental agreements (IEAs) to solve transboundary pollution issues under a game theoretic framework and examines the rules necessary to realize large, stable IEAs. After briefly introducing the concept of game theory, we show that transboundary pollution is an example of the well-known prisoner’s dilemma. Next, we consider IEAs using games with symmetric and asymmetric countries. The results show that IEA itself does not work automatically, that is, it is not sufficient to simply ask for countries’ voluntary participations for an efficient agreement to be stable. Finally, we examine the effects of transfer schemes from so-called supporters as an additional rule. Supporters are the countries that do not abate pollutants themselves but commit to pay transfers to countries who will sign the IEA. Using a framework of coalition formation game, we show that the supporter scheme is effective in promoting cooperative behaviors of the countries and expanding the size of stable IEAs for both symmetric and asymmetric countries. This analysis contributes to our understanding of the effectiveness of the transfer schemes among asymmetric countries since there are few studies which theoretically examine these matters.