Chapter

Bridging Reality and the Theory of International Environmental Agreements

Charles D. Kolstad

in Climate Change and Common Sense

Published in print February 2012 | ISBN: 9780199692873
Published online May 2012 | e-ISBN: 9780191738371 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199692873.003.0005
Bridging Reality and the Theory of International Environmental Agreements

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The literature on the economics of international environmental agreements has been developing for two decades. Some significant progress has been made. But some simple and fundamental questions remain unanswered, such as the Schelling Paradox of why intertemporal environmental agreements that benefit the developing world should be easier to achieve than agreements on development assistance involving no intertemporal dimensions. This chapter provides a general review of what the literature on the economics of international environmental agreements has taught us and what the implications are of that literature for the actual world of environmental agreements. Four possible anomalies are identified between the theory of international agreements and empirical evidence. (1) Why do individual countries appear to be willing to act unilaterally, when that is not individually rational in the standard sense? (2) Why is country income ignored in theory whereas it is a dominant issue in the ‘real world’. (3) Why does theory predict more free‐riding than one finds in experimental work or even casual empiricism of actual experience with treaties? (4) Why do increases in the benefit–cost ratio for abatement tends to decrease agreement size in theory but have the opposite effect in experiments. The chapter suggests that social preferences may offer a way of bringing theory and empirics closer together for the case of international environmental agreements.

Keywords: international environmental agreements; free‐riding; treaties

Chapter.  6268 words.  Illustrated.

Subjects: Economic Development and Growth

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