Transfers in climate action teams

Abstract

AbstractResource transfers are integral parts of climate negotiations as they affect incentives to participate in climate agreements. Whether to use transfers contingent on observing low emissions or on investment in green compliance technology is an open question. Using a repeated-game model with investment in green technology and resource transfers, we find that, because investments take time to fully affect emission incentives, there is a tradeoff. Investment-based agreements, where transfers are provided before emissions are realized but after investments have been undertaken, maximize the scope of cooperation. Emissions-based agreements, however, minimize the size of transfers whenever they foster cooperation.