A PROPOSAL TO REFORM THE KYOTO PROTOCOL: THE ROLE OF ESCAPE CLAUSES AND FORESIGHT

Larry Karp and Jinhua Zhao

No 6857, CUDARE Working Papers from University of California, Berkeley, Department of Agricultural and Resource Economics

Abstract: A reform to the Kyoto Protocol that allows signatories to pay a fine instead of meeting the target level of abatement would achieve three goals. First, it would defuse one U.S. objection to the agreement: the concern that the cost of achieving the target might turn out to be extremely high. Second, unlike other cost-reducing measures (such as trade in pollution permits) it would increase the equilibrium number of signatories in a non-cooperative participation game. Third, it would make it easier to force signatories to comply with their obligations. We study the participation game under an escape clause using both a Nash Equilibrium and the concept of a stable set when nations are “farsighted”. We compare our results to a prominent model of International Environmental Agreements (IEAs) which finds that the equilibrium size of an IEA tends to be small when the benefits of cooperation are large. We show that with an escape clause and a properly chosen level of fine, a large IEA can be formed even when the benefits of cooperation are large.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 45
Date: 2007
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Citations: View citations in EconPapers (5)

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Working Paper: A Proposal to Reform the Kyoto Protocol: the Role of Escape Clauses and Foresight (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ucbecw:6857

DOI: 10.22004/ag.econ.6857

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