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Economic Theory for the Environment

Economic Theory for the Environment

Essays in Honour of Karl-Göran Mäler

New Horizons in Environmental Economics series

Edited by Bengt Kriström, Partha Dasgupta and Karl-Gustaf Löfgren

Karl-Göran Mäler’s work has been a mainstay of the frontiers of environmental economics for more than three decades. This outstanding book, in his honour, assembles some of the best minds in the economics profession to confront and resolve many of the problems affecting the husbandry of our national environments.

Chapter 6: The Kyoto Protocol: An Economic and Game-Theoretic Interpretation

Parkash Chander, Henry Tulkens and Jean-Pascal van Ypersele

Subjects: economics and finance, environmental economics, environment, environmental economics


6. The Kyoto Protocol: an economic and game-theoretic interpretation Parkash Chander, Henry Tulkens, Jean-Pascal van Ypersele and Stephane Willems* 1 INTRODUCTION: COOPERATION AT THE WORLD LEVEL, FROM RIO TO KYOTO Our central theme in this chapter is the one of cooperation at the world level on the issue of climatic change. We start from the facts and then try to enlighten them by means of ideas provided by economics and game theory. The negotiations on climate change that have been taking place since the late 1980s within the United Nations institutions1 are obviously a quasiworldwide process, judging by the length of the list of countries2 participating. But these negotiations, prior to the Kyoto meeting, had led only to a ‘framework convention’, signed in 1992 in Rio de Janeiro, that was little more than a declaration of intentions. The real issue was then: are the continuing negotiations eventually going to lead to a sustainable agreement bearing on effective actions that is also worldwide? Or will they lead to a breaking up of the countries into separate blocs, each acting to the best of its own interests? The Kyoto Protocol, signed in December 1997, is the major development in the post-Rio evolution of these negotiations. Its importance lies mainly in the fact that it bears on effective actions to be taken by countries, actions that are recognized as binding commitments by them. However, according to the Protocol, not all countries have to take specific actions. As our summary presentation will report more...

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