International Environmental Cooperation in the One Shot Prisoners’ Dilemma

Abstract

Our analysis simultaneously deals with two types of uncertainty: first, the uncertainty of the behaviour of nature (stochastic or parametric uncertainty) and second, the uncertainty of the behaviour of nations (strategic uncertainty). This risk-strategic analysis points out that chances of international coalition formation to protect the global commons depend on the characteristics of the national welfare distributions and the country specific risk attitudes. Focusing on a static two-country-model and a dichotomous choice setting we point out that risk aversion is a prerequisite for transforming a static prisoners' dilemma (according to the order of expected national welfare) into a game of higher cooperation possibility. For different intensities of risk aversion we develop a typology of coopertive behaviour showing that enforcing environmental agreement is not necessarily harder than initiating it. Moreover we investigate how the design of strategies of international risk management (here: emission trading with and without trade restrictions) feeds back to the incentive structure of an international treaty, like the Kyoto protocol. We argue that the traditional judgement criteria of policy assessment in an international setting should be put into a wider context by the criterion of "cooperative push". This criterion reflects the ability of instruments and technologies to initiate and self-enforce international environmental agreements. Thereby it provides the necessary link between local and global concern.