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Participation and Duration of Environmental Agreements: Investment Lags Matter

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  • Thomas Eichner
  • Gilbert Kollenbach

Abstract

This paper analyzes participation in international environmental agreements in a dynamic game in which countries pollute and invest in two types of clean technology that differ in investment lags. If investments are noncontractible, countries underinvest in the long-lag technology in the last period of the contract, which leads to a hold-up problem. Countries do not underinvest in the short-lag technology. If the short-lag technology is sufficiently cheap, the hold-up problem becomes irrelevant, and significant participation is not feasible. Our paper supplements Battaglini and Harstad, who point out that the hold-up problem may result in significant participation and even in the first-best outcome, and shows that the assumptions required for significant participation may be more limited than expected.

Suggested Citation

  • Thomas Eichner & Gilbert Kollenbach, 2023. "Participation and Duration of Environmental Agreements: Investment Lags Matter," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 10(1), pages 33-53.
  • Handle: RePEc:ucp:jaerec:doi:10.1086/721095
    DOI: 10.1086/721095
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    Cited by:

    1. Kalk, Andrei & Sorger, Gerhard, 2023. "Climate policy under political pressure," Journal of Environmental Economics and Management, Elsevier, vol. 122(C).

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