Climate Clubs: Overcoming Free-riding in International Climate Policy

William D. Nordhaus

1,360 citations0/0 files storedAmerican Economic Review

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Climate Change Policy and Economics Energy, Environment, Economic Growth International Environmental Law and Policies

Abstract

Notwithstanding great progress in scientific and economic understanding of climate change, it has proven difficult to forge international agreements because of free-riding, as seen in the defunct Kyoto Protocol. This study examines the club as a model for international climate policy. Based on economic theory and empirical modeling, it finds that without sanctions against non-participants there are no stable coalitions other than those with minimal abatement. By contrast, a regime with small trade penalties on non-participants, a Climate Club, can induce a large stable coalition with high levels of abatement. (JEL Q54, Q58, K32, K33)

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References

1950Equilibrium points in n -person games 1992Game theory: analysis of conflict 1965An Economic Theory of Clubs 1994Self-Enforcing International Environmental Agreements 1987Coalition-Proof Nash Equilibria I. Concepts 2013Trade Theory with Numbers: Quantifying the Consequences of Globalization

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