2011 | OriginalPaper | Buchkapitel
Time-Consistent Emission Reduction in a Dynamic Leader-Follower Game
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IIn this paper, we search for multistage realization of international environmental agreements (IEAs). To analyze countries incentives and results of their interactions, we mathematically represent players’ strategic preferences and apply game-theoretic approach to make predictions about their outcomes. Initial decision on emission reduction is determined by the Stackelberg equilibrium concept. We generalize Barrett’s static ‘emission’ model to a dynamic framework and answer the question ‘how fast should the emission reduction be?’ It appears that sharper abatement is desirable in the early terms, which is similar to the conclusion of the
Stern
review. As discounting of the future payoffs becomes larger, more immediate reductions should be undertaken by the agreement parties. We show that without incentives from external organizations or governments, such depollution path can lead to a decline of the membership size.