A bargaining experiment on heterogeneity and side deals in climate negotiations

Greer Gosnell and Alessandro Tavoni (alessandro.tavoni@unibo.it)

No 249, GRI Working Papers from Grantham Research Institute on Climate Change and the Environment

Abstract: The recent global climate change agreement in Paris leaves a wide gap between pledged and requisite emissions reductions in keeping with the commonly accepted 2°C target. A recent strand of theoretical and experimental evidence establishes pessimistic predictions concerning the ability of comprehensive global environmental agreements to improve upon the business-as-usual trajectory. We introduce an economic experiment focusing on the dynamics of the negotiation process by observing subjects’ behavior in a Nash bargaining game. Throughout repeated rounds, heterogeneous players bargain over the allocation of a fixed amount of profit-generating emissions with significant losses attached to prolonged failure to reach agreement. We find that the existence of side agreements that constrain individual demands among a subset of like countries does not ensure success; however, such side agreements reduce the demands of high-emission parties. Our results highlight the importance of strong signals amongst high emitters in reaching agreement to shoulder a collective emissions reduction target.

Date: 2016-08
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env and nep-exp
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Journal Article: A bargaining experiment on heterogeneity and side deals in climate negotiations (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:lsg:lsgwps:wp249

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