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Risk Aversion and International Environmental Agreements

Author

Listed:
  • Vincent Boucher
  • Yann Bramoullé

Abstract

We introduce uncertainty and risk aversion to the study of international environmental agreements. We consider a simple model with identical agents and linear payoffs. We show that a stable treaty with positive action always exists. While uncertainty lowers the action of signatories, we find that it may increase participation. In addition, uncertainty may generate multiple equilibria. A treaty with low action and low participation may coexist with one with high action and high participation. Overall, and despite risk aversion, the impact of uncertainty on welfare may be positive. A reduction in uncertainty may hurt international cooperation.

Suggested Citation

  • Vincent Boucher & Yann Bramoullé, 2007. "Risk Aversion and International Environmental Agreements," Cahiers de recherche 0739, CIRPEE.
    • Handle: RePEc:lvl:lacicr:0739
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    International Environmental Agreements; Risk Aversion; Uncertainty;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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