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4 Int'l Env't Agreements: Pol. L. & Econs. 1 (2004)

handle is hein.journals/intenve4 and id is 1 raw text is: International Environmental Agreements: Politics, Law and Economics 4: 1-26, 2004. Y 2004 Kluwer Academic Publishers. Printed in the Netherlands. Enforcing the Climate Regime: Game Theory and the Marrakesh Accords1 JON HOVI1'2 and IVAR AREKLETT' 'CICERO; 2 Department of Political Science, University of Oslo, P.O. Box 1097 Blindern, 0317 Oslo, Norway (E-mail: jon.hovi@stv.uio.no; ivar.areklett@cicero.uio.no) Accepted 19 March 2003 Abstract. This article reviews basic insights about compliance and hard enforcement that can be derived from various non-cooperative equilibrium concepts, and evaluates the Marrakesh Accords in light of these insights. Five different notions of equilibrium are considered - the Nash equilib- rium, the subgame perfect equilibrium, the renegotiation proof equilibrium, the coalition proof equilibrium, and the perfect Bayesian equilibrium. These various types of equilibrium have a number of implications for effective enforcement: (1) Consequences of non-compliance should be more than proportionate. (2) Punishment needs to take place on the Pareto frontier, rather than by rever- sion to some suboptimal state. (3) An effective enforcement system must be able to curb collective as well as individual incentives to cheat. (4) A fully transparent enforcement regime is not uncon- ditionally a good thing. It is concluded that constructing an effective system for hard enforcement of the Kyoto Protocol is a formidable task that has only partially been accomplished by the Marrakesh Accords. In practice, however, the design of the compliance system for the climate regime had to balance a desire to minimize non-compliance against other important goals, including the need for due process. Key words: climate change, compliance, enforcement, non-cooperative games 1. Introduction The process of constructing an international regime on climate change, initiated by the Rio Conference in 1992, has recently suffered two serious blows and cel- ebrated two moderate triumphs.2 The first blow was the failure in November 2000 to reach agreement at the sixth Conference of the Parties (COP-6) in the Hague. The second blow was the announcement by President George W. Bush in March 2001 that the United States was not going to ratify the Kyoto Protocol. These two events led some observers to doubt the realism of developing a viable and effective regime to control emissions of greenhouse gases. The two triumphs were that the Parties proved able to reach agreement at the Bonn and Marrakesh conferences in July and November 2001. While watering down considerably some of the provisions of the original treaty, the Bonn and Marrakesh deals make it likely that the Kyoto Protocol will soon be ratified by

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