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Aurélie Slechten, ECARES Print
Friday, 25 May 2012, 12:15 - 13:15

Aurélie Slechten, ECARES


Unilateral actions and environmental agreements

AbstractI analyze international environmental agreements on polluting emissions in context with asymmetric information about abatement costs and voluntary participation. The outcome of an agreement is an abatement level for each country and a payoff sharing rule. Due to asymmetric information, negotiations of an efficient agreement may fail. I introduce the possibility for a country to undertake unilateral environmental actions before international negotiations. The standard economic argument against unilateral actions is that they are ineffective in easing these negotiations due to the free-rider problem. In this paper, I show that a unilateral action is an optimal strategy to facilitate negotiations when this action reveals some private information about the country that undertakes it. Unilateral actions are modeled in a two-stage game. In stage 1, if benefits of abatement are strongly asymmetric, there exists a set of sharing rules such that the country with the highest benefits will undertake a unilateral action. In stage 2, negotiations of an efficient agreement succeed if the country acting unilaterally has a sufficiently low abatement cost.

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