Does a Clean Development Mechanism Facilitate International Environmental Agreements?
23 Pages
Posted: 4 Nov 2014
Max Planck Institute for Tax Law and Public Finance; Social Science Research Center Berlin (WZB); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics
Dresden University of Technology - Faculty of Economics and Business Management; CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute
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 P., 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
