UNCERTAINTY, LEARNING AND HETEROGENEITY IN INTERNATIONAL ENVIRONMENTAL AGREEMENTS

Charles Kohlstad, Alistair Ulph

Research output: Working paper

178 Downloads (Pure)

Abstract

In an earlier paper (Kolstad and Ulph, 2006) we studied the formation of International Environmental Agreements under uncertainty about the damages that might be caused by climate change and different models of learning (complete learning, partial learning or no learning), in which better information about these damage costs becomes available. Our results were generally pessimistic: the possibility of either complete or partial learning generally reduces the level of global welfare that can be achieved from forming an IEA relative to no learning. In that paper we assumed that uncertainty regarded a parameter common to all countries, so that countries were identical ex ante as well as ex post. In this paper we extend our analysis to the case where there is no correlation between damage costs across countries; each country is uncertain about a particular parameter (in our case the benefit-cost ratio) drawn from a common distribution but, ex post, each country’s realized parameter value is independently drawn. Consequently, while countries remain identical ex ante, they may be heterogeneous ex post. We show that this change reinforces our negative conclusions about the effects of partial learning on international environmental agreements, but, under certain conditions, moderates our negative conclusions about the effects of complete learning.
Original languageEnglish
Place of PublicationUniversity of Manchester
Number of pages36
Publication statusPublished - Jul 2010

Publication series

NameSCI discussion paper series
PublisherSustainable Consumption Institute
No.7

Keywords

  • Environmental economics
  • International environmental agreements
  • SCI_
  • working paper
  • discussion paper

Research Beacons, Institutes and Platforms

  • Sustainable Consumption Institute

Fingerprint

Dive into the research topics of 'UNCERTAINTY, LEARNING AND HETEROGENEITY IN INTERNATIONAL ENVIRONMENTAL AGREEMENTS'. Together they form a unique fingerprint.

Cite this