Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154968
Authors: 
Janssen, Josef
Year of Publication: 
1999
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 14.1999
Abstract: 
International climate protection investments (Joint Implementation and Clean Development Mechanism projects) are burdened with problems of contract enforcement, which prevent the realisation of efficiency gains associated with these investments. The paper analyses this problem from the perspective of non-cooperative game theory and proposes two different solutions to the co-operation problem. The first analyses the potential role of national environmental authorities in facilitating credible commitment of the project host operating under its jurisdiction. It is argued that the threat of punishing the project host if he breaches the contract may serve this purpose. The effective level of punishment is derived. The second option involves strategic delegation of contract implementation to a third party operating under the same jurisdiction as the project host. Again, the paper explores the conditions that ensure incentive-compatibility. Both options are based on the idea that the project sponsor may commit himself credibly by becoming a Stackelberg leader.
Subjects: 
Joint Implementation
Clean Development Mechanism
climate protection
international environmental agreements
international investments
contract enforcement
co-operation
incentive compatibility
JEL: 
D21
D62
D70
F20
F23
K12
K40
Q25
Q28
Q40
Document Type: 
Working Paper

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