On breadth and depth of climate agreements with pledge-and-review bargaining

Abstract

This paper analyzes the effects of partial cooperation on the breadth and depth of climate agreements in dynamic games in which countries emit, invest in green technology, decide to participate in a climate coalition and participants negotiate the contract duration. When choosing emissions reductions (pledges), coalition countries apply Harstad’s (2023a) pledge-and-review bargaining and partially cooperate. We distinguish between stock-independent and stock-dependent investment costs. It is shown that narrow-but-deep agreements may be welfare superior to broad-but-shallow agreements for signatories. In addition, if the degree of partial cooperation is sufficiently high, broad-and-deep agreements and even first best can be achieved.