Environment & Statecraft

The Strategy of Environmental Treaty-Making

by Scott BarrettJohns Hopkins University School of Advanced International Studies

Session 1:The Participation Game

The rise of the treatyMultilateral Treaties Currently In Force by Date of Adoption

0

50

100

150

200

250

300

1900 1925 1950 1975 2000

Year

1945

Agreements requiringmore than 10 partiesto enter into force

All other treaties

Treaty participationParticipation in the International Convention for the Regulation of Whaling

-10

-5

0

5

10

15

20

25

30

35

40

45

1948

1951

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

Num

ber

of

With

draw

als

Num

ber

of P

artie

s an

dN

umbe

r of

Acc

essi

ons

No. of Parties(1980)

No. of Accessions(1980)

No. of Withdraw als (1980)

Source: Data supplied to the author by the International Whaling Commission.

Acid rain case study

Helsinki Protocol (1985) parties must reduce their sulfur emissions 30% from the 1980 level by 1993.

Success?

"Compliance" with the Helsinki Protocol

Yugoslavia

United States

United Kingdom

UkraineSw itzerland

Sw eden

Spain

Slovenia

Slovakia

RussiaRomania

Moldova

Portugal

Poland

Norw ay

NetherlandsLithuania

Liechtenstein

Italy

Ireland

IcelandHungary

Greece

Germany

France

Finland

DenmarkCzech Republic

Croatia

Canada

Bulgaria

Belgium

BelarusAustria

Armenia

-100% -50% 0% 50% 100%

Percentage Reduction Sulphur Emissions, 1980-93 Less 30%

Source: UNECE web page, June

2000.

The Helsinki Protocol appears to be a success, but...

• Participation is incomplete.

• “Over-compliance” by most parties.

• Several non-parties also reduced emissions by more than 30%.

…and the treaty lacks mechanisms essential to success

• Acid rain is an asymmetric game, and yet the treaty does not offer side payments.

• Helsinki does little to encourage participation and nothing to enforce compliance.

Conclusion: Helsinki made little difference

Oslo Protocol (1994)

The Oslo Protocol is designed differently.– Different emission limits for every country.

– Limits set to meet “critical loads.”

– Allows “JI” for cost-effectiveness.

– Acknowledges need to enforce compliance.

But– Oslo does not sustain full participation.

– And most parties “over-comply.”

"Compliance" with the Oslo Protocol

-60 -40 -20 0 20 40 60 80 100

Austria

Belarus

Belgium

Bulgaria

Canada

Croatia

Czech Republic

Denmark

Finland

France

Germany

Hungary

Ireland

Italy

Luxembourg

Nethelands

Norw ay

Poland

Russia

Slovakia

Slovenia

Sw eden

Sw itzerland

United Kingdom

Percent Reduction Sulfur Dioxide Emissions from 1980 Level

Required Emission Reduction 2000 Actual Emission Reduction 1999

Oslo Protocol

Also•Country most in danger of not complying (Portugal) has not ratified it.•“Critical loads” are not achieved.•JI mechanisms not implemented.•No side payments.•Treaty does not specify consequences of non-compliance—except to say that it may be necessary to “assist” countries having problems complying.

A Contrast: Title IV• Cap and trade; participation mandatory.• Relies on precise, continuous monitoring.• Imposes a fine, set by Congress, of $2,682

per ton (in 2000). Actual marginal costs are about $187.

• Requires that polluters make up for the shortfall in the next year.

• Makes non-compliance a felony.• Result: 2000 compliance rate, 99.99946%!

1911 Fur Seal Treaty

• Pribilofs discovered in 1786; up to 5 million seals.• Sole owner management reduced the herd to 2m.

The early years

• Pelagic sealing decimated the herd, and nearly led to war. By 1909 there were less than 150,000 seals left.

Later…

• The Treaty of 1911 brought a reversal of fortune: by 1917 the herd had tripled in size; by 1940 there were once again 2 million seals.

Later still…

How did it do this?

By changing the rules of the game

1. Created an aggregate surplus by banning pelagic sealing.

2. Used side payments to redistribute the surplus such that every party gained.

3. Deterred non-participation by means of a “linchpin” punishment.

4. Deterred non-compliance by making pelagic sealing a criminal offence.

5. Deterred entry by banning trade in non-authenticated skins.

Montreal Protocol

• Negotiated in 1987; adjusted and amended several times since then.

• Bans production and consumption of the ODSs.

• Achieves nearly universal participation.

• By around 2050, the ozone layer is expected to be restored.

• How did the MP succeed?

The underlying PD

P

A

0 N-1Number of others that play Abate

Card game: You must forfeit $7.50 if you hand in your red card. You get $1 for every red card handed in by anyone.Suppose N = 100.

0

- $6.5

$92.5

$99

The participation game

0 N-1Number of others that play Signatory

k*-1

n

s

• Must choose to be a Signatory or a Non-signatory.• Signatories must play Abate if at least k* = 8 countries accede; otherwise, signatories can behave as they like. $0

$0.5

$8

$92.5

$99

Note: Not drawn to scale.

Collective rationality

• Why k* = 8? Why not set k* = 100?

• k* = 8 is the only credible minimum participation level for this game.

• With the Fur Seal Treaty, we were lucky; k* = N.

An Analytical Approach:The Underlying PD

• For the N-player PD, payoffs are:

i = b(qi + Q-i) – cqi

where qi = {0, 1}; countries either play Abate (qi = 1) or Pollute (qi = 0).

• Assume c > b (play Pollute is a dominant strategy) and bN > c (full cooperation requires that every country play Abate).In the earlier card game we had i = (qi + Q-i) – 7.5qi so that b = 1 and c = 7.5.

Transformed PD• In the PD, countries can play Abate or Pollute.• But in the real world, countries can do more than

this; they can negotiate a treaty.– Stage 1: Each player chooses to be a signatory or a

non-signatory.

– Stage 2: Signatories choose to play Abate or Pollute with the objective of maximizing their collective payoff.

– Stage 3: Non-signatories choose to play Abate or Pollute.

Backwards Induction

• When deciding whether to sign, a country will know what the treaty requires (given the participation of others) and what it will do if it does not sign.

Stage 3

• Since c > b, non-signatories always do better by playing Pollute.

Stage 2

• Let k be the number of signatories.

• Collectively, signatories will play Abate if kb c; they will play Pollute if kb < c.

• For the experimental game, c = 7.5 and b = 1. Hence, signatories play Abate if k 8 and Pollute otherwise.

Stage 1• If six or fewer others play Signatory, it

doesn’t matter if you play Signatory—so you might as well play Signatory (s = n = 0).

• If seven others play Signatory, your accession triggers entry into force and you get a payoff of s = 0.5 if you play Signatory and n = 0 if you play Non-signatory.

• If eight or more others play Signatory, you do better by playing Non-signatory.

Equilibrium

• Treaty requires that parties play Abate.

• Treaty enters into force if ratified by k* countries (where k* is the smallest integer greater than c/b). In our example, k* = 8.

• Precisely k* countries (8 in our example) ratify the treaty.

• All non-signatories play Pollute.

Implications

• Gains to cooperation are (bN – c)N.• Gains increase in N and b, decrease in c.• k*, by contrast, decreases in b and increases in c.• So k* will be large when the gains to cooperation

are small.• When the gains are large (and payoffs are linear),

(credible) punishments are small and so only a small number of parties can be supported.

• Cooperation harder the larger is N.

Cost-benefit analysis of the Montreal Protocol

NoControls

MontrealProtocol

UnilateralImplementation

of MP

Ozone Depletion (%)By 2000By 2050By 2100

1.0%15.7%50.0%

0.8%1.9%1.2%

0.9%10.3%49.0%

Payoffs to the US(Billions of 1985 $US)BenefitsCostsNet BenefitsB-C Ratio

$3,575$21

$3,554170

$1,373$21

$1,35265

Source: EPA (1988).

Summary so far

• A treaty can transform the underlying game.

• The transformation is constrained by the credibility of the threat to punish non-participation.

• When N is “large,” a treaty is unable to transform a PD by very much.