Coordinating to avoid the catastrophe

Vitus Bühl and Robert C. Schmidt

VfS Annual Conference 2020 (Virtual Conference): Gender Economics from Verein für Socialpolitik / German Economic Association

Abstract: In the presence of a tipping point for dangerous climate damages, the cooperation problem of climate protection can be transformed into a coordination problem that is much easier to deal with (Barrett, 2013). This holds in particular if the amount of greenhouse gas emissions that triggers the catastrophe is precisely known, while the well-known free-rider problem re-appears if the location of the threshold is sufficiently uncertain. In this paper, we focus on the question how the non-signatories (outsiders of a climate agreement) coordinate to avoid the catastrophe, if the tipping point is known. In particular, in light of a multiplicity of equilibria in this coordination problem, the assumption that outsiders will always successfully coordinate to avoid the threshold, even if this is in their collective interest, seems overly optimistic. We analyze how the probability that the outsiders coordinate on an equilibrium in which the threshold is avoided, affects the incentives of countries to join the climate coalition. In some cases, there are multiple equilibria at the participation stage: an equilibrium with full participation, and an equilibrium in which a much smaller coalition forms - just large enough to achieve an outcome in which the catastrophe is avoided with positive probability.

Keywords: tipping point; climate catastrophe; coordination game; international environmental agreement; climate cooperation (search for similar items in EconPapers)
JEL-codes: D62 F53 Q54 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cdm, nep-ene, nep-env, nep-gth and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc20:224649

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