A Mechanism Design Approach to Climate Agreements

Martimort, David and Sand-Zantman, Wilfried (2016) A Mechanism Design Approach to Climate Agreements. Journal of the European Economic Association, 14 (3). pp. 669-718.

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Official URL: http://tse-fr.eu/pub/29080

Abstract

We analyze 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 levels and compensations to take into account
multilateral externalities. We delineate conditions for efficient agreements
and trace out possible inefficiencies to the conjectures that countries
hold following disagreement. We show how optimal mechanisms admit
simple approximations with attractive implementation properties. Finally,
we also highlight how limits on commitment strongly hinder performances
of optimal mechanisms.

Item Type: Article
Language: English
Date: 2016
Refereed: Yes
Uncontrolled Keywords: public goods, incentive constraints, mechanism design, global warming
JEL codes: D82 - Asymmetric and Private Information
H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Q54 - Climate; Natural Disasters
Subjects: B- ECONOMIE ET FINANCE
Divisions: Toulouse School of Economics - TSE
Site: UT1
Date Deposited: 16 Mar 2015 14:56
Last Modified: 18 Oct 2017 15:11
OAI ID: oai:tse-fr.eu:29080
URI: http://publications.ut-capitole.fr/id/eprint/16710

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