Discussion Paper - Harvard Project on Climate Agreements

Negotiating Effective Institutions Against Climate Change

  • Christian Gollier
  • Jean Tirole
| July 2015


In environmental matters, the free riding generated by the lack of collective action is aggravated by concerns about leakages and by the desire to receive compensation in future negotiations. The dominant "pledge-and-review" approach to mitigation will deliver appealing promises and renewed victory statements, only to prolong the waiting game. The climate change global commons problem will be solved only through coherent carbon pricing. We discuss the roadmap for the negotiation process. Negotiators must return to the fundamentals: the need for uniform carbon pricing across countries, for verification, and for a governance process to which countries would commit. Each country would enjoy subsidiarity in its allocation of efforts within the country. We suggest an enforcement scheme based on financial and trade penalties to induce all countries to participate and comply with the agreement. Finally, the choice among economic approaches, whether a carbon price commitment or a cap-and-trade, is subject to trade-offs, on which alternative reasonable views may co-exist. We discuss monitoring reasons for why we personally favor an international cap-and-trade agreement.

Christian Gollier, Toulouse School of Economics

Jean Tirole, Toulouse School of Economics

For more information on this publication: Please contact Harvard Project on Climate Agreements
For Academic Citation: Gollier, Christian and Jean Collier. “Negotiating Effective Institutions Against Climate Change.” Discussion Paper, 2015-72, Harvard Project on Climate Agreements, July 2015.

The Authors