Controlling Global Warming

Controlling Global Warming

Perspectives from Economics, Game Theory and Public Choice

New Horizons in Environmental Economics series

Edited by Christoph Böhringer, Michael Finus and Carsten Vogt

In this exhaustive study, the authors break new ground by integrating cutting edge insights on global warming from three different perspectives: game theory, cost-effectiveness analysis and public choice. For each perspective the authors provide an overview of important results, discuss the theoretical consistency of the models and assumptions, highlight the practical problems which are not yet captured by theory and explore the different applications to the various problems encountered in global warming. They demonstrate how each perspective has its own merits and weaknesses, and advocate an integrated approach as the best way forward. They also propose a research agenda for the future which encompasses the three methods to create a powerful tool for the analysis and resolution of global pollution problems.

Chapter 4: On the political economy of international environmental agreements – some theoretical considerations and empirical findings

Carsten Vogt

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


4. On the political economy of international environmental agreements - some theoretical considerations and empirical findings Carsten Vogt 1. INTRODUCTION The problem of international cooperation in environmental affairs has been addressed during the last decade in a couple of models. Predominantly, the problem has been analyzed in a game-theoretic framework in which the main focus is on the underlying pure economic incentives for sovereign states to enter into international environmental agreements (IEAs). Combating global warming clearly constitutes the problem of providing a pure public good. Greenhouse gas emissions from one state are equally distributed in the atmosphere. Reductions in these emissions, thus not only benefit the country that undertakes the reduction, but also all other countries in the world that might otherwise suffer from more severe global warming.2 Thus, climate protection is a non-excludable good. Moreover, the consumption of one unit of climate protection by one country does not lower the consumption of other countries of this good; thus, climate protection is also a non-rival good. As is well known from standard economic theory, pure public goods are faced with severe incentive problems. Any rational acting country that only pursues its own interest will not take into account the positive externalities its reduction measures will have on other countries. Thus, the level of greenhouse gas (GHG)-emission reductions will be too low. The real tragedy that countries face is the fact that all countries would be better off if all of them behaved in a cooperative way, i.e. if all...

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