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Has the Kyoto Protocol induced carbon leakage? We conduct the first empirical ex post evaluation of the protocol. We derive a theoretical gravity equation for the carbon dioxide content of trade, which accounts for intermediate inputs, both domestic and imported. The structure of our new panel database of the carbon content of sectoral bilateral trade flows allows controlling for the endogenous selection of countries into the Kyoto Protocol. Binding commitments under Kyoto have increased committed countries' embodied carbon imports from noncommitted countries by around 8% and the emission intensity of their imports by about 3%. Hence, Kyoto has indeed led to leakage.

In recent decades, democratic countries have negotiated hundreds of international treaties and agreements. This paper analyzes the equilibrium design of treaties negotiated by political incumbents seeking reelection. We show that incumbents are prone to negotiate treaties that are “weak,” in that they may or may not be complied with: this makes it possible to differentiate the alternative candidates in a way that favors the incumbent. We also show that political economy considerations lead to overambitious treaties that rely too much on technology instead of sanctions to motivate compliance. Our theory can rationalize several puzzles associated with treaties.

We analyze participation in international environmental agreements in a dynamic game in which countries pollute and invest in green technologies. If complete contracts are feasible, participants eliminate the holdup problem associated with their investments; however, most countries prefer to free ride rather than participate. If investments are non-contractible, countries face aholdup problem every time they negotiate; but the free-rider problem can be mitigated and significant participation is feasible. Participation becomes attractive because only large coalitions commit to long-term agreements that circumvent the holdup problem. Under well-specified conditions even the first-best outcome is possible when the contract is incomplete.

The December 2015 Paris Climate Agreement is better than no agreement. This is perhaps the best that can be said about it. The scientific evidence on global warming is alarming, and the likelihood depressingly small that the world can stay below a 2°C—even less a 1.5°C warming—over pre-industrial times. The Paris Agreement does not provide a blueprint for achieving these stabilization objectives. But it is ultimately the hope, however small, that a fundamental and rapid energy transition is achievable that must inform social and political behavior and activism in the coming years. In this sense, the Paris outcome is an aspirational global accord that will trigger and legitimize more climate action around the world. The question is whether this will happen quickly enough and at a sufficient scale to avoid disastrous warming of the planet. What is certain is that it will not occur without determined and far-reaching government intervention in energy markets in the next few years, particularly in the largest polluting countries.

This paper analyzes a game in which countries repeatedly make emission and technology investment decisions. We derive the best equilibrium, that is, the Pareto-optimal subgame-perfect equilibrium, when countries are insufficiently patient for folk theorems to be relevant. Relative to the first best, the best equilibrium requires countries to overinvest in technologies that are green, that is, strategic substitutes for polluting, but to underinvest in adaptation and brown technologies, that is, strategic complements to polluting. Technological transfers and spillovers might discourage investments but can be necessary to motivate compliance with emissions when countries are heterogeneous.

Using granular data from the OECD from 2010 to 2018 that differentiate between adaptation and mitigation measures to address climate change, we employed a double-hurdle model to examine whether countries’ Paris Agreement commitments and governance capacity help attract international climate-change-related financial aid. We found that (1) countries received a short-term aid boost in the year when they submitted the nationally determined contribution, and countries that committed only to action targets rather than emission goals were more likely to receive funds; (2) both the quality of the budget and financial management and the quality of public administration significantly enhanced the likelihood of receiving aid, but only the quality of public administration contributed to attracting funding for adaptations; and (3) multilateral institutions played catalytic roles in fostering bilateral international climate-change aid, particularly by increasing the likelihood of funding.

This paper analyses the effects of altruism on the formation of climate coalitions in the standard two-stage game of self-enforcing international environmental agreements with identical countries. Altruism implies that each country values, to some extent, every other country’s welfare when deciding on its coalition membership and emissions policy. In the Nash [Stackelberg] game, the fringe [coalition] countries exploit the altruism of the coalition [fringe] countries so that altruism decreases [increases] the coalition size. In any case, global emissions and global welfare are close to the non-cooperative values. However, altruism narrows the gap between the individually optimal emissions and the socially optimal emissions, so altruism increases global welfare. The effects of altruism on the formation of climate coalitions crucially depends on its modelling: If altruism affects the membership decision but not the policy decision, or if each coalition country is more altruistic toward other coalition countries than toward fringe countries, altruism can stabilise large coalitions up to the grand coalition. Finally, altruism can stabilise small coalitions but destabilises large coalitions with asymmetric countries.

This study presents empirically calibrated simulations of three different variants of environmental matching agreements aimed at reducing global greenhouse gas emissions. We determine whether matching agreements can produce larger stable coalitions and increase abatement contributions and payoffs as compared to standard agreements. The matching agreements we analyze feature uniform matching rates by which coalition members match the unconditional contributions of (i) the other coalition members, (ii) all other players, or (iii) only non-members, while non-members do not commit to any matching and maximize their individual payoffs. The simulation considers twelve asymmetric world regions with linear abatement benefits and quadratic costs, calibrated based on the STACO 3 model, and uses emissions data from the shared socioeconomic pathways database. We find that the first variant of the matching game fails to produce any stable coalitions and thus performs worse than the standard agreement that produces a stable two-player coalition. The second variant produces a stable grand coalition and significantly increases the abatement and payoff levels beyond the non-cooperative Nash baseline. Partial coalitions are unstable in this game. The third variant produces a two-player coalition similar to the standard coalition formation game, but with different members and higher abatement and payoff levels due to the matching mechanism.

Faced with a global emissions problem such as climate change, we know that if countries’ emissions decisions are made in an independent and self-interested fashion the outcome can be very far from optimal. One proposed solution is to have countries enter international environmental agreements (IEAs) whereby individual countries’ emissions decisions are taken in the interests of all the participating countries and so reflect a degree of altruism. However, if the decision to co-operate is made in a self-interested fashion the standard non-cooperative model of IEAs yields the pessimistic conclusion that the more serious the environmental problem the smaller will be the equilibrium membership of an IEA. Our paper examines the implications for emissions, IEA membership and welfare of assuming that countries make both emissions and IEA membership decisions in the alternative moral fashion of acting as imperfect Kantians as defined by Alger and Weibull (Econometrica 81:2269–2302, 2013). We show that (i) the first-best can be achieved when countries either act as Perfect Kantians or by fully cooperating; (ii) in a more imperfect setting, these two forms of moral behaviour are complementary approaches to improving welfare outcomes in the sense that the greater the weights on Kantian behaviour the larger is the equilibrium coalition; (iii) the weights on Kantian behaviour that will induce full cooperation and hence the first-best are significantly less than 1; (iv) for given Kantian weights, our model generates higher equilibrium IEA membership, lower emissions and higher welfare than in the related paper by Eichner and Pethig (International environmental agreements when countries behave morally) which, we argue, does not fully capture the benefits of membership decisions.

Since the Kyoto Protocol entered into force in 2005, researchers have investigated whether it could achieve the expected results. This paper explores the potential structural break caused by the Kyoto Protocol and its impact on the environmental Kuznets curve (EKC) via a novel procedure in three groups of countries using 1951–2017 data. Our proposed procedure is to use the varying coefficient model (VCM) along with the improved Akaike information criterion to detect yearly structural breaks from 1997, the year the Kyoto Protocol was adopted, to 2012, the year the first commitment came to an end. The VCM also allows us to analyze the magnitude and direction of a break, and its estimation technique further enables us to plot an empirical EKC trajectory. The empirical results show that a downward structural break is identified in 2007 for those countries that ratified the Kyoto Protocol and stayed bound to their reduction targets. For these countries, the EKC displays an inverted-U shape with a turning period, not a point. Since the break occurs during this transition, it appears to accelerate the falling rate of emission intensity and promote their progression into the stage of environmental improvement. Therefore, domestic ratification and compliance are the keys to the downward transition of the EKC. Our results shed light on the policy implications of international regulation, especially regarding the importance of domestic compliance with the recent EU carbon border adjustment mechanism.