Bargaining over a climate deal : is it worse to wait and see

Courtois , Pierre
        INRA
        , Montpellier .
         UMR 1135 Laboratoire Montpelliérain d'Economie Théorique et Appliquée; Tazdaït , Tarik
        . Cired

Bargaining over a climate deal : is it worse to wait and see

2011

Courtois , Pierre (INRA , Montpellier (France). UMR 1135 Laboratoire Montpelliérain d'Economie Théorique et Appliquée) | Tazdaït , Tarik (Centre National de la Recherche Scientifique, Nogent sur marne(France). Cired)

Assuming that a North-South transfer is the key to climate cooperation, we ask when and how much the North should o§er to the South in return for a commitment to reduce deforestation and forest degradation. In light of the risk of irreversible damage over time, we examine a negotiation with a deadline. We assess the conditions for an agreement to be immediate or delayed, and discuss situations likely to result in negotiation failure. Despite the risk of irreversible damage over time, we show that cooperation is likely to be delayed and characterize situations where North and South fail to agree within the deadline. Although Pareto-improving, cooperation may collapse because of ine¢ ciencies related to incomplete information. We show that in negotiations with a deadline, uncertainty about the beneÖts deriving from cooperation and the irreversibility of the damage that will be caused if cooperation is delayed, are the two key components affecting choice.

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