Sober Optimism and the Formation of International Environmental Agreements
81 Pages Posted: 8 Mar 2019
Date Written: January 25, 2019
Abstract
We analyze a dynamic model of international environmental agreements (IEAs) where countries cannot make long-term commitments or use sanctions or rewards to induce cooperation. Countries can communicate with each other to build endogenous beliefs about the random consequences of (re)opening negotiation. If countries are patient, an effective agreement can be reached after a succession of short-lived ineffective agreements. This eventual success requires “sober optimism”: the understanding that cooperation is possible but not easy to achieve. Negotiations matter because beliefs are important. Our results help explain heterogeneous outcomes and also provide a counterweight to prevailing pessimistic views about the prospects for IEAs. An empirical application illustrates the importance of sober optimism in alleviating the problem of climate change, and it shows how a reduction in the fragmentation of the global polity makes it easier to coordinate on beliefs that support a good equilibrium.
Keywords: Environmental Agreements; Climate Change; Dynamic Game
JEL Classification: C72; C73; D62; H41; Q54
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