Strategic Delegation in the Formation of International Environmental Agreements

29 Pages Posted: 17 Apr 2019

See all articles by Sarah Spycher

Sarah Spycher

University of Bern

Ralph Winkler

University of Bern - Department of Economics; University of Bern - Oeschger Centre for Climate Change Research

Date Written: March 28, 2019

Abstract

We analyse a principal-agent relationship in the context of international climate policy. Principals in identical countries first decide whether to join an international environmental agreement (IEA), then delegate the domestic emission choices to an agent. Finally, agents in all countries decide on emissions. In countries not joining the IEA, agents choose emissions to maximize their own payoff, while agents of countries joining the IEA set emissions to internalize some exogenously given fraction γ of the externalities that own emissions cause on all members of the IEA. We find that principals in all countries have an incentive to delegate to agents with lower environmental concerns than they exhibit themselves. This strategic delegation incentive is increasing with the number of countries that joined the IEA for principals in non-participating countries, and decreasing for principals of countries joining the IEA. In addition, principals in countries that joined the IEA delegate such that they not only internalize the fraction γ but all externalities among the members of the IEA, i.e., strategic delegation crowds out all efforts to increase coalition sizes by less ambitious agreements. In summary, strategic delegation leads to lower number of countries joining the IEA and higher overall emissions.

Keywords: international climate policy, coalition formation game, political economy, strategic delegation, strategic voting

JEL Classification: Q54, Q58, C72, D62, H41, P16

Suggested Citation

Spycher, Sarah and Winkler, Ralph, Strategic Delegation in the Formation of International Environmental Agreements (March 28, 2019). Available at SSRN: https://ssrn.com/abstract=3361731 or http://dx.doi.org/10.2139/ssrn.3361731

Sarah Spycher

University of Bern ( email )

Gesellschaftsstrasse 49
Bern, BERN 3001
Switzerland

Ralph Winkler (Contact Author)

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, 3001
Switzerland
+41 31 631 4508 (Phone)

HOME PAGE: http://www.ralph-winkler.de

University of Bern - Oeschger Centre for Climate Change Research ( email )

Zähringerstrasse 25
Bern, 3012
Switzerland

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