Reference

Julien Beccherle, and Jean Tirole, “Regional Initiatives and the Cost of Delaying Binding Climate Change Agreements”, IDEI Working Paper, n. 628, December 2010.

Abstract

The Kyoto and Copenhagen Protocols on climate change mitigation postponed the specification of binding commitments to a future negotiation. This paper analyzes the strategic implications of delayed negotiations. While, as iswell-understood, the incentive to free ride leads to excessive emissions prior to a binding agreement, the cost of delay is magnified by players’ attempt to secure a favorable bargaining position in the future negotiation. A “brinkmanship”, an “effort rebalancing”, and a “raising rival’s cost” effects all concur to generate high post-agreement emissions. The paper applies this general insight to a variety of policy instruments, from the issuance of forward or bankable permits to standards and green investment policies.

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