Martimort, David and Sand-Zantman, Wilfried (2014) Accords environnementaux : le marché peut-il réussir l’arbitrage entre incitations et participation ? Revue Économique, 65 (4). pp. 481-197.

Abstract

This article proposes a perspective on international climate agreements, based on mechanism design. We exhibit a trade-off between incentives and participation. We derive a general condition under which the first-best allocation can be implemented. We then discuss how this condition is affected by the assumptions on the status quo, in particular whether a non-cooperative or a grandfathering solution prevails when the negotiation fails. We show that, when the feasibility condition is satisfied, a market-based solution can indeed implement the first best allocation. At last, when the condition does not hold, we characterize the main properties of the second-best solution.