December 10, 2012, 11:00–12:30
Toulouse
Room MS 001
Environment Economics Seminar
Abstract
We analyze international environmental agreements in contexts with asymmetric information, voluntary participation by sovereign countries and possibly limited enforcement. Taking a mechanism design perspective, we study how countries can agree on effort targets and compensations to take into account multilateral externalities. We highlight a tradeoff between solving free riding in effort provision at the intensive margin for participating countries and free riding at the extensive margin to ensure participation of all countries. We also show that the optimal mechanism admits a simple approximation by menus with attractive implementation properties. Finally, we also highlight how limits on enforcement and commitment might strongly hinder performances of optimal mechanisms.
Keywords
public goods; asymmetric information; global warming; mechanism design;