International Environmental Agreement: A Dynamical Model of Emissions Reduction

Abstract

Over the last two decades, the interest in international environmental problems such as climate change, ozone depletion, marine pollution has grown immensely and it has driven an increased sense of interdependence between countries.

Cooperation among different countries appears necessary and this results in International Environmental Agreements (IEA) such as Helsinky and Olso Protocol signed in 1985 and 1994; Montreal Protocol on the reduction of CFCs that deplete the ozone layer, signed in 1987; Kyoto Protocol, on the reduction of greenhouse gases causing global warming, signed in 1997. In these IEAs, the number of signatories varies considerably and this justifies the increasing interest of many authors to explain why IEAs are ratified only by a fraction of the potential signatories and to suggest strategies to increase their number.

Economists have emphasized two important aspects: agreements must be profitable (there must be gains to all signatory countries), agreements must be selfenforcing (in the absence of any international authority, there must be incentives for countries to join and to remain in an agreement). So, the participation of countries in an international agreement, to improve the quality of the environment, is a complex question for different reasons. First, countries are sovereign and their participation to IEA is voluntary, there is no supra national authority that forces countries to participate to an agreement, as well as there is no international environmental judicial system powerful enough to guarantee compliance to an IEA. Second, each country may have an incentive to free-ride, in fact while the costs for reducing emissions are carried out exclusively by the country that is taking action, the benefits of a reduction in emissions are shared by all countries, so that each country has the incentive to wait for the others to reduce their emissions.