A bargaining experiment on heterogeneity and side deals in climate negotiations

Abstract

The recent global climate change agreement in Paris leaves a wide gap between pledged and requisite emissions reductions in keeping with the commonly accepted 2°C target. A recent strand of theoretical and experimental evidence establishes pessimistic predictions concerning the ability of comprehensive global environmental agreements to improve upon the business-as-usual trajectory. We introduce an economic experiment focusing on the dynamics of the negotiation process by observing subjects' behavior in a Nash bargaining game. Throughout repeated rounds, heterogeneous players bargain over the allocation of a fixed amount of profit-generating emissions with significant losses attached to prolonged failure to reach agreement. We find that the existence of side agreements that constrain individual demands among a subset of like countries does not ensure success; however, such side agreements reduce the demands of high-emission parties. Our results highlight the importance of strong signals among high emitters in reaching agreement to shoulder a collective emission reduction target.Recent developments in climate policy have reaffirmed the perceived importance of minilateral agreements among a small number of countries prior to engaging in large fora such as the annual Conferences of the Parties (COPs). A growing literature in political science points to the merits and drawbacks of entering into negotiations among small-n clubs

Immediate action is the best strategy when facing uncertain climate change

“…However, as the number of rounds increases, intermediate losses may accumulate over the course of the game, adding up to a large overall loss. The effects of timing have only recently become apparent, experimental evidence and theoretical framework all pointing to the trend that increasing round number increases cooperation 21 , 35 , 36 .…”

Communicating sentiment and outlook reverses inaction against collective risks

“…Our research reveals the mechanisms by which communication and behavioral types interact to help resolve collective-risk social dilemmas in the context of climate change. Different from previous studies with communication in climate-change game experiments (15,18,19), we focused on sentiment (i.e., emotional state and satisfaction) and outlook (i.e., expectations and aspirations). This focus was motivated by research on the negotiation process which shows that negotiators expecting conflict (resp., cooperation) become closed-minded (resp., open-minded) (27).…”

“…Research increasingly models climate-change decision making using experimental games in which individuals face a collective-risk social dilemma and players pay a penalty if the group fails to reach its target contributions ( 8 , 13 – 19 ). Experimental games often involve a threshold beyond which a penalty is activated after some number of rounds.…”

Cooperation in the Climate Commons

“…Unfortunately, coordination can be undermined by asymmetries in wealth (and past emissions) among countries (Tavoni et al 2011;Gosnell and Tavoni 2017) and by two forms of uncertainty that plague climate change negotiations: strategic uncertainty and scientific uncertainty (Barrett and Dannenberg 2012;Dannenberg et al 2015). When enough of either (asymmetry or uncertainty) is present, the "climate negotiation game" reverts to a prisoner's dilemma, whereby countries would be better off cutting emissions, but delay action indefinitely in the pursuit of their self-interest.…”