Abstract
Strategies of international risk management, as the implementation of tradable emission permits, feed back to the incentive structure of a treaty like the Kyoto Protocol. Discussing the Kyoto Protocol the question was: Should there be any restrictions on the trading of emission permits or not? With the help of a simple two country model it is shown that the enforcement of environmental treaties critically depends on the type and the intensity of national risk preferences. Assuming that the ‘global alliance of risk’ decreases with each co-operative contribution risk aversion is a prerequisite for enhancing the chances of global risk management. It is moreover the national intensity of risk aversion that determines whether trade should be restricted or not. In order to improve international coalition formation less risk averse countries might be able to “dictate” the rules of the game, here: the design of the permit regime.
The author gratefully acknowledges the receipt of grant no. EN 192/4 - 1 by the German Research Foundation (DFG). She is also indebted to Prof. Dr. Alfred Endres, University of Hagen, and an anonymous referee for helpful comments on an earlier draft of this paper.
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Ohl, C. (2003). Inducing Environmental Co-operation by the Design of Emission Permits. In: Marsiliani, L., Rauscher, M., Withagen, C. (eds) Environmental Policy in an International Perspective. Economy & Environment, vol 26. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-0333-8_5
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DOI: https://doi.org/10.1007/978-94-017-0333-8_5
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