The Design of Stable International Environmental Agreements: Economic Theory and Political Economy

Abstract

International environmental agreements typically strive for the solution of a common property resource dilemma. Since the sovereignty of states precludes external enforcement, international environmental agreements must be self-enforcing. Game theoretical models explain why rewards and punishments imposed through the environmental externality generally fail to enforce full cooperation. Therefore, environmental treaties incorporate provisions that enhance the incentives for participation such as transfers, sanctions and linkage to other negotiation topics in international politics. Moreover, interaction with markets and governments as well as the rules and procedures adopted in the negotiation process influence the design and the effectiveness of an international environmental agreement.

Keywords: international environmental agreements, game theory

JEL Classification: Q2, H41, C72