Project

InFairCom

Start of Project 12/2018
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End of Project 11/2022

During the United Nations Climate Change Conference in December 2015 (COP21) and in its resulting Paris Agreement, 195 countries agreed to set out a global action plan to avoid dangerous climate change by limiting global warming to well below 2°C above pre-industrial levels. However, the commitments are still insufficient to achieve this target. The project “Incentives, Fairness and Compliance in International Environmental Agreements” (InFairCom) examines the Paris Agreement and, in particular, the necessary conditions both for adequate compliance mechanisms and for strategies to approach this long-term climate objective. In order to receive valuable insights and robust results, InFairCom employs several distinct but complementary methodological approaches including (i) meta-analyses of existing agreements, (ii) qualified judicial assessments, (iii) theoretical economic models linked with (iv) experimental and (v) empirical applications.

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Update on the project´s process

Our legal assessment reveals that the Paris Agreement, Rulebook, and NDCs emphasize individual fairness criteria rather than prescribing common ones. This precludes the legal evaluation of individual Parties’ compliance with the agreement. In a meta-analysis of existing International Environmental Agreements (IEAs) we also find that clearly defined fairness criteria could help to foster compliance. Our theoretical work examines the stability of IEAs if countries are inequality averse. An optimal transfer scheme is derived that is highly redistributive leading to highly effective stable coalitions. However, our empirical analysis suggests that, in the absence of clearly defined mechanisms to monitor emissions, transfers might result in emissions increase in recipient countries. In a laboratory experiment, we simulate the Paris Agreements’ Ratchet Mechanism and find that it might lead to a reduction in climate protection efforts and losses in efficiency. Finally, our survey among international climate negotiators suggests that determining NDCs by economy-wide targets is the most internationally applicable method to harmonize NDCs.

Figure 1 summarizes the results of a laboratory public good experiment designed to test the Paris Agreement’s Ratchet Mechanism that prescribes that NDCs have to increase over time. As key indicator for successful cooperation, we use participants’ cooperation rates. In terms of climate policy, a cooperation rate of 100 percent corresponds to a globally optimal level of climate action. We cover three different decision-making scenarios: First, a control group (base) that represents a hypothetical world without ratcheting. Second, the weak ratcheting scenario (weakR) works the same as base, except that each participant’s cooperation rate must be at least as high as in the previous round. Third, the strong ratcheting scenario (strongR) work the same as base, except that each participant’s cooperation rate must be higher than in the previous period. At the beginning, cooperation rates in weakR and strongR are lower than in base. While ratcheting leads to an increase in cooperation rates over time, this increase is not strong enough to compensate for the initial loss in efficiency. On average, cooperation rates are lower in weakR and strongR compared to base.

Flagship-Paper

Gallier, Carlo and Bodo Sturm. The Ratchet Effect in Social Dilemmas. Journal of Economic Behavior & Organization 186, 2021, 251–268.

Gavard, Claire and Niklas Schoch. Climate Finance and Emission Reducions: What Do the Last Twenty Years Tell Us? ZEW Discussion Paper, 2021.

Kesternich, Martin, Andreas Löschel, and Andreas Ziegler. Negotiating Weights for Burden Sharing Rules in International Climate Negotiations: An Empirical Analysis. Environmental Economics and Policy Studies 23 (2), 2021, 309–331.

Mahabadi, Donia. Enhancing Fairness in the Paris Agreement: Lessons from the Montreal and Kyoto Protocols and the Path Ahead. 2021.

Rogna, Marco and Carla Vogt. Coalition Formation with Optimal Transfers when Players are Heterogeneous and Inequality Averse. Ruhr Economic Papers No. 20-865, Essen, 2020.

Will, Ulrike and Cornelia Manger-Nestler. Fairness, Equity and Justice in the Paris Agreement. Terms and Operationalization of Differentiation. Leiden Journal of International Law, 34 (2) 2021, 397–420.