Dynamic climate clubs: On the effectiveness of incentives in global climate agreements

Abstract

A proposal to combat free riding in international climate agreements is the establishment of a climate club—a coalition of countries in a structure to encourage high levels of participation. Empirical models of climate clubs in the early stages relied on the analysis of single-period coalition formation. The earlier results suggested that there were limits to the potential strength of clubs and that it would be difficult to have deep abatement strategies in the club framework. The current study extends the single-period approach to many periods and develops an approach analyzing “supportable policies” to analyze multiperiod clubs. The major element of the present study is the interaction between club effectiveness and rapid technological change. Neither alone will produce incentive-compatible policies that can attain the ambitious objectives of international climate policy. The trade sanctions without rapid technological decarbonization will be too costly to produce deep abatement; similarly, rapid technological decarbonization by itself will not induce deep abatement because of country free riding. However, the two together can achieve international climate objectives.

An Ecological Impact Fund

“… Each member state imposes an emission levy within its jurisdiction, starting at a certain level and then gradually increasing on a pre-agreed schedule (Nordhaus uses a base level of $50/tCO2 in 2025, set to increase 3% annually in real terms).  Each member state imposes a flat tariff (Nordhaus envisions 5-10%) on all imports from exactly those states that refuse to be members (Nordhaus 2021).…”

Pursuing higher environmental goals for agriculture in an interconnected world

“…While it would in theory limit the use of specific substances in other countries, not all countries require the same substances, so the effect it could have on pesticide type and use in other countries may not be significant. Furthermore, applying zero tolerance could be costly to implement for all supply chain actors, given that some minimum quantity of residue may be present in containers and adjacent products and the measure could generate additional trade tensions if not appropriately designed (Nitzko, Enno and Spiller, 2022 [149]; Drogué and DeMaria, 2012 [150]).…”

Behavior, decisions and ecological transition: experimental approaches with policy implications

“…More recently, Nordhaus himself has revisited the problem, including now a repeated game perspective. In Nordhaus (2021), the author extends the one-shot approach to many periods, introducing an approach that deals with "supportable policies" in a scenario of multiperiod clubs. An additional novelty of his study is that he considers interaction between club effectiveness and rapid technological change, neither of which will allow to attain the objectives of international climate policy on its own.…”