ch 21: the economics of global agreements

Question 1

positive vs negative harm

Answer 1

Positive harm: if we don’t fix this we will suffer now
Negative harm: if we don’t fix this we will die earlier

Question 2

why are international agreements on the environment unlikely to succeed?

Answer 2

1. agreements are public goods
   - burden sharing is difficult to achieve
2. imperfect info makes determining each country’s true wtp nearly impossible
   - Each country understates wtp so that doesn’t have to carry true burden and can free ride on others that are.

Question 3

true wtp for pollution control agreements is a function of

Answer 3

income

the environmental benefits the country is likely to receive

Question 4

the free rider problem means that international agreements will be

Answer 4

1. too weak from an efficiency (and safety) point of view
2. Unenforceable
3. Incentivise cheating and non-compliance

Question 5

intergovernmental organizations (IGOs)

Answer 5

To overcome the unenforceability and non-compliance problems, most international agreemetnns create intergovernmental organizations (IGOs) to address to monitor countries from the outside

IGOs can often only issue non-binding standards and monitor compliance

Question 6

3 main enforcement tools

Answer 6

1. social pressure
2. restricted access to compensation funds for cheaters and non-compliant participants
3. targetted trade sanctions

Question 7

compensation fund pro and con

Answer 7

pro: would act to incentivize joining treaty and complying with its term
Con: can induce compliance by only poor countries as high income countries are the ones who contribute to the fund

Question 8

targetted trade sanctions

Answer 8

restrict sanctions to goods related to the reaty
- minimizes the possibility that the sanction could lead to trade war

Question 9

Why did the montreal protocol suceed?

Answer 9

a. The clear and present danger from the ozone hole
b. A narrowly defined problem
c. Ease of enforcement due to a limited number of producers

Question 10

why did the rio convention on biodiversity fail

Answer 10

a. A clear but distant danger of negative harm
b. A broadly defined problem
c. Inability to take action without funding from rich countries

Question 11

Aspects that make stopping global warming easy (similar to mtl protocol)

Answer 11

1. The likelihood of positive harm
2. the existence of well-defined problems

Question 12

aspects that make stopping global warming difficult

Answer 12

1. Highly decentralized producers
2. Greenhouse treaty would have to confront sustainability issues ranging from deforestation to population growth

Question 13

an effective treaty requires 3 components

Answer 13

1. Ambitious numerical emission reduction targets for co2 and methane
2. A mechanism for rich countries to transfer tech and resources to poor countries to finance sustainable development
3. Strong enforcement mechanisms

Question 14

a method to overcome free riding

Answer 14

the formation of climate clubs (coalition of the willing) that would impose climate club tarrifs on imported goods and services from non-members
Counties outside coalition will have difficult time profiting outside of it