ABSTRACT
Climate change is a major challenge to international cooperation, as emphasized for instance by the Stern Review and various IPCC reports (Stern 2006 and IPCC 2007) but also many others. One of the main problems of achieving cooperation under international climate agreements is free-riding. Countries have an incentive to adopt a non-cooperative behavior. Emission reduction constitutes a public good. No country can be excluded to benefit from the emission reduction of other countries. Moreover, by not contributing to emission reduction, a country saves on abatement cost. The literature on the formation of self-enforcing international environmental agreements (SEIEAs) studies the underlying incentive structure in detail, by considering various assumptions related to the behavior of countries and their objectives, the cost–benefit structure and many other economic features affecting the incentive structure of governments to join climate treaties, but also pointing to possibilities to mitigate the free-rider incentives. For surveys, see for instance Barrett (2003) and Finus (2003, 2008).
