Matching-commitment agreements to incentivize climate action

June 19, 2020

Many countries are failing to comply with the non-binding commitments of the Paris Agreement, making it increasingly clear that we have to reconsider how to ensure collective action to limit global warming to less than 2°C above preindustrial levels. A new IIASA-led study supports a different approach to designing an international climate agreement that would incentivize countries to cooperate.

Although there is general consensus that global greenhouse gas emissions are too high, most governments would prefer other countries to reduce their emissions rather than reducing their own. The Paris Agreement is intended to solve this collective action problem, but according to a 2017 United Nations Environment Programme report, this landmark accord is likely insufficient. The authors of the study published in Scientific Reports explored one proposed solution to this problem, namely matching-commitment agreements. In such an agreement, each country can commit to reducing its emissions by an amount that depends on the emissions reductions of other countries. Using these commitments to conditional emissions reductions allows countries to incentivize other countries to reduce their emissions.

"Much of the current discussion around international climate agreements centers on how to induce countries to accede to a global carbon price, and prevent countries who do not impose such a tax from gaining an economic advantage over those who do. One prominent approach to doing so is the "climate club" approach, which incentivizes countries to cooperate by imposing trade sanctions on those who do not. While this approach is compelling and may avoid some of the shortcomings of the Paris Agreement, its implementation would be difficult, as international-trade law would need to be amended to allow for penalties on non-participants," explains study lead author Chai Molina, a researcher at IIASA, Princeton University, and the University of Pennsylvania. "We wanted to understand if it's possible to incentivize countries to cooperate by using a matching-commitment agreement rather than trade sanctions or asking them to make binding commitments to unilateral actions."

The study results indicate that such an agreement incentivizes countries to make matching commitments that in turn incentivize emissions reductions and reduce emissions from those expected without an agreement. In the one-shot "climate game" analyzed in the study, matching-commitment agreements successfully diverted two heterogeneous countries from a rational, stable outcome from which no country has an incentive to deviate, to a unique new, efficient equilibrium at which their emissions are lower than they would be in the absence of an agreement. At this new equilibrium, both countries are better off in terms of their economic payoffs than they would have been without the matching-commitment agreements.

The authors say that one of the aspects that makes their study different from other studies on matching-commitment agreements, is that most of them treat countries as if they were identical, assuming that they would suffer the same damages from climate change, and that they have the same selfish economic incentives to keep greenhouse gas emissions high. This research was inspired by a previous study that analyzed matching-commitment agreements between countries whose incentives may be different from one another. That study, however, considered a business-as-usual scenario in which some countries act irrationally, in the sense that they have an incentive to lower their emissions unilaterally, but do not do so. In this setting, it is unclear whether the matching-commitment agreement results in emissions reductions beyond those that would have been achieved without any agreement, if countries simply heeded their selfish incentives.

In their study, the authors analyzed a more realistic scenario in which countries consistently respond rationally to their incentives, both in the business-as-usual scenario and under a matching-commitment agreement. This new choice of business-as-usual is important, not just because it changes the payoffs countries obtain for different emissions reductions, but also because it allowed the authors to show that the matching-commitment agreement still results in reduced emissions, even if countries heed their economic incentives in the absence of an agreement.

The researchers emphasize that their work is a "proof of concept", and that further work on the subject will help to determine whether these agreements would work in practice. Nonetheless, the study results suggest that matching-commitment agreements are a promising approach to constructing an international environmental agreement. Moreover, a similar approach could in principle be used to tackle other public goods problems in situations in which enforcement is problematic.

Molina C, Akçay E, Dieckmann U, Levin SA, & Rovenskaya E (2020). Combating climate change with matching-commitment agreements. Scientific Reports DOI: 10.1038/s41598-020-63446-1


Researcher contact

Chai Molina
Guest Postdoctoral Research Scholar
Evolution and Ecology Program
Advanced Systems Analysis Program
Tel: +43 2236 807

Press Officer

Ansa Heyl
IIASA Press Office
Tel: +43 2236 807 574
Mob: +43 676 83 807 574

About IIASA:

The International Institute for Applied Systems Analysis (IIASA) is an international scientific institute that conducts research into the critical issues of global environmental, economic, technological, and social change that we face in the twenty-first century. Our findings provide valuable options to policymakers to shape the future of our changing world. IIASA is independent and funded by prestigious research funding agencies in Africa, the Americas, Asia, and Europe.

International Institute for Applied Systems Analysis

Related Climate Change Articles from Brightsurf:

Are climate scientists being too cautious when linking extreme weather to climate change?
Climate science has focused on avoiding false alarms when linking extreme events to climate change.

Mysterious climate change
New research findings underline the crucial role that sea ice throughout the Southern Ocean played for atmospheric CO2 in times of rapid climate change in the past.

Mapping the path of climate change
Predicting a major transition, such as climate change, is extremely difficult, but the probabilistic framework developed by the authors is the first step in identifying the path between a shift in two environmental states.

Small change for climate change: Time to increase research funding to save the world
A new study shows that there is a huge disproportion in the level of funding for social science research into the greatest challenge in combating global warming -- how to get individuals and societies to overcome ingrained human habits to make the changes necessary to mitigate climate change.

Sub-national 'climate clubs' could offer key to combating climate change
'Climate clubs' offering membership for sub-national states, in addition to just countries, could speed up progress towards a globally harmonized climate change policy, which in turn offers a way to achieve stronger climate policies in all countries.

Review of Chinese atmospheric science research over the past 70 years: Climate and climate change
Over the past 70 years since the foundation of the People's Republic of China, Chinese scientists have made great contributions to various fields in the research of atmospheric sciences, which attracted worldwide attention.

A CERN for climate change
In a Perspective article appearing in this week's Proceedings of the National Academy of Sciences, Tim Palmer (Oxford University), and Bjorn Stevens (Max Planck Society), critically reflect on the present state of Earth system modelling.

Fairy-wrens change breeding habits to cope with climate change
Warmer temperatures linked to climate change are having a big impact on the breeding habits of one of Australia's most recognisable bird species, according to researchers at The Australian National University (ANU).

Believing in climate change doesn't mean you are preparing for climate change, study finds
Notre Dame researchers found that although coastal homeowners may perceive a worsening of climate change-related hazards, these attitudes are largely unrelated to a homeowner's expectations of actual home damage.

Older forests resist change -- climate change, that is
Older forests in eastern North America are less vulnerable to climate change than younger forests, particularly for carbon storage, timber production, and biodiversity, new research finds.

Read More: Climate Change News and Climate Change Current Events is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to