Dynamic cooperation with tipping points in the climate system

Robert Schmidt

Oxford Economic Papers, 2017, vol. 69, issue 2, 388-409

Abstract: Tipping points in the climate system can stabilize climate treaties; the stabilizing effect, however, often vanishes when the location of the threshold is uncertain. I demonstrate that in a dynamic setting, additional welfare gains can improve the prospects of cooperation. In the model, intertemporal efficiency gains result from abatement costs that are convex in each period. While non-cooperative countries tend to postpone their abatement efforts until the last minute as a result of the free-rider incentive, cooperation allows countries to allocate their abatement efforts efficiently over time. I show that cooperation often improves the outcome substantially, and arises endogenously in the model. In some cases, a ‘threshold-equilibrium’ emerges, where the stable coalition size is just large enough for the signatories to invest in avoiding the catastrophe.

JEL-codes: D62 F53 H23 Q54 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (7)

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