Does a Clean Development Mechanism Facilitate International Environmental Agreements?

Konrad, Kai A.; Thum, Marcel P.

doi:10.2139/ssrn.2518349

Does a Clean Development Mechanism Facilitate International Environmental Agreements?

Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2014 - 20

23 Pages Posted: 4 Nov 2014

See all articles by Kai A. Konrad

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Marcel P. Thum

Dresden University of Technology - Faculty of Economics and Business Management; CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute; Institute for Corruption Studies

Date Written: November 3, 2014

Abstract

When politicians negotiate in international climate conventions they may suffer from incomplete information about each other's preferences about reaching an agreement. As is known, this may cause failure to reach an efficient cooperative agreement. We study the role of the clean development mechanism (CDM) for the likelihood of such failure. The CDM has been introduced in the context of the Kyoto Protokol to allow countries to make efficiency enhancing use of cross-country low-cost mitigation opportunities. We use a simple bargaining framework to uncover why this mechanism may reduce the likelihood for reaching an efficient cooperative climate agreement.

Keywords: clean development mechanism, international climate agreements, bargaining, incomplete information

JEL Classification: Q54, Q58, F53, H41

Suggested Citation: Suggested Citation

Konrad, Kai A. and Thum, Marcel, Does a Clean Development Mechanism Facilitate International Environmental Agreements? (November 3, 2014). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2014 - 20, Available at SSRN: https://ssrn.com/abstract=2518349 or http://dx.doi.org/10.2139/ssrn.2518349