Oxford Economic Papers, 69(2), 2017, 345–364
doi: 10.1093/oep/gpw062
Advance Access Publication Date: 5 December 2016
Environmental cooperation: contrasting
international environmental agreements
By Todd Sandler
School of Economic, Political & Policy Sciences, University of Texas at Dallas, Richardson, TX
75080; e-mail: [email protected]
Abstract
This conceptual paper investigates two paired environmental treaties. At the global
level, the effectiveness of the Montreal Protocol on reducing ozone depleters is contrasted with the ineffectiveness of the Kyoto Protocol on curbing greenhouse gases
(GHGs). Even though curbing ozone shield depletion and reducing GHGs are quintessential global public goods, the outcomes of these treaties are drastically different.
This paper explores why. At the regional level, the success of the Helsinki Protocol
on reducing sulfur emissions is contrasted with the slower and less profound success of the Sofia Protocol on limiting nitrogen oxides. These paired comparisons
demonstrate how effective international cooperation transcends the properties of
public goods, thereby encompassing other identified drivers. The paper also contrasts the regional and global paired treaties. Concluding remarks indicate some useful insights for designing effective international environmental agreements.
Key words: F53, H87, Q50.
1. Introduction
From 1960 to 2012, population grew from about 3 to 7 billion people; population is anticipated to stabilize at 10 billion around 2100 (UN Population Fund, 1994; UN Environment
Program [UNEP], 2013). This continued growth of population places stresses on the environment as the carrying capacity of ecosystems is surpassed at the global and regional levels.
Once carry capacity is exceeded, further demands on an ecosystem cause permanent degradation that limits the system’s benefits for future users.1 At the global level, the atmosphere is an ecosystem; at the regional level, watersheds and forests are ecosystems.
Human activities can degrade ecosystems that transcend political borders, thereby resulting in uncompensated interdependencies or transnational externalities that involve two
or more sovereign countries. There are many ways to address these externalities. For example, in the case of two neighboring countries whose firms pollute a common lake,
1 An ecosystem is a community of living organisms and their environment.
C Oxford University Press 2016.
V
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ENVIRONMENTAL COOPERATION AND TREATIES
bargaining can internalize the externality in the Coase (1960) tradition. When more countries are involved, an international environmental agreement (IEA) can be framed and subsequently ratified to restrain countries’ externality-causing activities. These IEAs are
generally most successful when it is in the interests of ratifiers to abide by the treaty’s mandates; i.e., each ratifier perceives a net benefit from following the mandates. When this
holds, the IEA is self-enforcing and self-policing (Barrett, 1994). Since the end of World
War II, IEAs have grown greatly in number as the world tries to address mounting numbers
of transboundary environmental concerns (Barrett, 2003; Finus and Capparr
os, 2015;
Battaglini and Harstad, 2016).
The primary purpose of this conceptual paper is to contrast two global and two regional
environmental concerns in order to show how seemingly similar pollution (public good)
problems may possess vastly different collective action prognoses when subjected to treaty
making. At the global level, stratospheric ozone shield depletion is being successfully ameliorated by the Montreal Protocol on Substances That Deplete the Ozone Layer (henceforth, Montreal Protocol) and its amendments, which are universally adopted. Within the
next 35 to 60 years, the stratospheric ozone layer is anticipated to return to its pre-1980
density (UNEP, 2015). By contrast, the Kyoto Protocol on reducing greenhouse gases
(GHGs) has not stemmed their rise; rather, GHG emissions have increased by about 50%
since 1990 (Harvey, 2012). This failure is due, in large part, to the Kyoto Protocol’s mandated reduction affecting a mere 15% of the world’s GHG emissions (UNEP, 2013, p. 10).
Major GHG emitters—China, the USA, the Russian Federation, Canada, India, Brazil, and
Australia—are not currently bound by the Kyoto Protocol (Olmstead and Stavins, 2012).
Mandated emission cutbacks for the 2008–2012 compliance period excluded developing
countries and nonratifying major polluters (e.g., the USA). The recent Paris Agreement,
which is open for signature, does not exempt developing countries from ‘nationally determined’ reductions in their GHG emissions (United Nations Framework Convention on
Climate Change [UNFCCC], 2016).
At the regional level, the paper considers sulfur- and nitrogen-based acid rains and their
IEAs. For sulfur, the Helsinki Protocol and two subsequent protocols have dramatically
reduced emissions in Europe. For nitrogen oxides, treaty-mandated reductions have been
more modest and slower to materialize. Subtle considerations, including spatial dispersion,
distinguish collective action success and failure in the case of acid rain.
By contrasting these paired global and regional environmental challenges, the paper has
a number of goals. First, it shows that the prognosis for environmental collective action
must transcend the basic public good properties of the pollutants. This is consistent with
Young’s (2011) viewpoint that contextual factors are important to IEA success or failure.
Second, the paper distills the collective action considerations at the country, regional, and
global levels that foster or inhibit environmental cooperation. Third, the identification of
favorable and unfavorable drivers of collective action in two contrasting paired comparisons assists the reader to acquire an appreciation of what promotes effective IEAs. At times,
these factors can be engineered into the treaty’s structure (e.g., treaty design to make potential participants realize a net benefit from ratification) and, at other times, fortuitous circumstances promote cooperation. Fourth, the insights gained from the two paired
comparisons can be applied to other transnational environment concerns that require action by two or more countries.
T. SANDLER
347
2. Preliminaries
Two basic properties of pure public goods involve nonrival and nonexcludable benefits.
Generally, the removal of pollutants yields these purely public benefits in terms of reduced
health risks in the cleansed area. However, the removal of some pollutants may be impurely
public because of remover-specific benefits or spatial dispersion considerations (Cornes and
Sandler, 1996).
Since Hirshleifer (1983), a third property of publicness influences allocative efficiency
and the form of institutional arrangements, such as treaties. In particular, the aggregator
technology indicates how individual provision of the public good determines the overall
level of the good that can be consumed. The most common aggregator technology is summation, where individual contributions are summed in an unweighted fashion, thereby
implying that everyone’s provision is perfectly substitutable. For a weighted-sum aggregator, each individual’s provision is weighted so that units from some providers count for
more than those from other providers. When pollution generation or reduction depends on
the spatial position of the polluter, a weighted-sum aggregator applies.
2.1 Principles of collective action
Collective action principles are partly behind successful treaty making. Olson (1965) put
forward these principles as general rules of thumb, indicating the ability of a group—say,
sovereign countries—to achieve an outcome that cannot be achieved through independent
action. Large groups may not provide any of the public good. Moreover, the larger the
group, the greater the suboptimality of the provision of the public good.2 The size propositions suggest that global public goods, such as replenishment of the ozone layer or curbing
climate change, should be difficult or impossible to achieve. However, this has not been the
case for increasing the density of the ozone layer, which cautions the reader to regard
Olson’s collective action principles as important rules of thumb that may be violated
(Sandler, 2015).
Another set of principles involve the composition of the collective. Olson (1965) viewed
homogeneous groups as more apt to form, owing to shared values and low transaction
costs. This suggests that IEAs at the regional level among like-minded and similarly
endowed countries are more apt to be framed and ratified. Additionally, Olson indicated
that markedly asymmetric groups are more likely to achieve some collective provision as
one or more countries are sufficiently compelled to privilege other countries with the public
good. For normal goods and identical tastes, models of the private provision of public
goods indicate that contributors include all agents above an income threshold (Bergstrom
et al., 1986; Andreoni and McGuire, 1993). If there is a sole contributor, then it will be the
richest agent. When tastes are not the same, strong preferences for the public good can propel a less rich country into the group that privileges others (Buchholz and Sandler, 2016).
For ozone shield depletion, early bans on chlorofluorocarbons (CFCs) aerosol propellants
by Belgium, Canada, Norway, Sweden, and the USA reduced ozone shield depletion for the
world (Barrett, 2003, p. 223). Olson’s (1965) celebrated exploitation hypothesis indicated
2 A third size principle—the larger the group, the smaller the collective provision—does not hold for
income normal goods (Chamberlin, 1974).
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ENVIRONMENTAL COOPERATION AND TREATIES
that large, rich countries shoulder the collective action burden for small, poor countries.3
For IEAs, this exploitation hypothesis predicts that rich countries will generally do more
than their poor counterparts and will, if necessary, contribute to help the poor countries
participate. In the case of climate change, mitigation and adaptation for developing countries will cost hundreds of billions of dollars that must be supplied in part by rich countries
(UNEP, 2013; UNFCCC, 2016).
A final set of Olson’s (1965) propositions concern how institutional designs may promote collective action. Olson’s first design principle includes the use of selective incentives
or private inducements to make potential participants view action as yielding positive net
benefits. For the Montreal Protocol, selective incentives to developing countries allowed
them to delay compliance by up to ten years, gain technical and financial assistance, increase
their per capita CFCs consumptions to 0.3 kilogram, and escape trade sanctions (UN, 1987).
The second institutional recommendation involves structural design to motivate action.
Treaty design often concerns, among other things, a threshold level of ratifiers (i.e., minimum participation cause) before the treaty goes into force. For the Montreal Protocol,
eleven or more countries, accounting for at least two-thirds of 1986 consumption of ozone
depleters, had to ratify before the treaty entered into force (UN, 1987). A minimum participation cause limits the leakage problem associated with non-signatory countries (Finus and
Maus, 2008; Finus and Capparr
os, 2015). For the recently proposed Paris Agreement,
Article 21 states that at least 55 countries, accounting for 55% of global GHG emissions,
must sign the agreement for it to go into effect (UNFCCC, 2016). Another treaty design may
involve trade restrictions to limit leakages, which occur when treaty-bound countries move
their pollution activities to non-bound countries. Yet another participation-promoting design can be to institute less stringent emission reductions that may result in more signatories,
whose collective cutbacks offset the more modest required reductions per emitter (Finus and
Maus, 2008).
2.2 Why is the need for transnational environmental cooperation increasing?
There are a number of factors that increase the need for transnational environmental cooperation. First, the breakup of countries means that some national environmental problems
may become transnational concerns. Second, enhanced remote sensing and terrestrial monitoring can better spot transboundary environmental issues. Third, advances in technology
can create new pollution problems, as in the case of CFCs. Fourth, population growth places
stresses on ecosystems, which may affect multiple countries. Fifth, the rise of globalization
and regionalism results in more trade and movement of factors of production, both of which
can augment transnational pollution flows. Sixth, the enhanced importance of social media
offers environmental activists a powerful tool to coalesce public opinion to push for transboundary pollution control and agreements.
Another important facilitator of IEAs is a sufficient number of polluters, whose net gain
(benefits minus costs) from reducing pollution is positive when transaction costs are
included as part of costs (Sandler, 1997, 2004; Pittel and Rübbelke, 2012). A sufficient
number refers to some threshold participation that will make a noticeable difference in pollution levels over time and curtail leakage. The Montreal Protocol threshold of two-thirds of
CFCs consumers had this noticeable difference; however, the Kyoto Protocol threshold did
3 Olson’s exploitation hypothesis rests on identical tastes and different income (Sandler, 2015;
Buchholz and Sandler, 2016).
T. SANDLER
349
not make a noticeable difference. The latter follows because the Kyoto Protocol’s initial
curbs on Annex I countries only affected 15% of the world’s GHG emissions. Another facilitator of IEAs is the recognition of a dire consequence in the absence of a treaty. If gains from
an IEA are in the near term, while costs are in the more distant future, then this benefit–cost
stream promotes the treaty by fostering positive net benefits in present value terms. By
contrast, near-term costs followed by distant benefits work against treaty ratification and
compliance, as in the case of the Kyoto Protocol.
3. Ozone shield depletion
Addressing the thinning stratospheric ozone layer since 1989 marks a landmark success in
transnational cooperation that involves the provision of a global public good (GPG).
The ozone layer ranges from ten to twenty-five miles above the earth and is essential to life
by absorbing much of the harmful ultraviolet-B radiation from the sun.
The real concern over CFCs and other ozone depleters came in May 1985 when the
British Antarctic Survey documented that the springtime concentrations of the ozone layer
over Antarctica had declined markedly compared to measurements from 1964. This finding
motivated some major producing and consuming nations—particularly the USA—to
consider greater cutbacks in CFCs. In fact, the US Environmental Protection Agency (EPA)
had already banned the use of CFCs as an aerosol propellant in 1978 based on concerns
over the ozone layer raised in 1974 by Mario Moline and Sherwood Rowland. The motivation to reduce the use and production of CFC was greatly enhanced by the EPA (1987a,
1987b) reports that estimated that a 50% reduction in CFC emissions from 1986 levels
could save the USA $64 trillion by 2075 in reduced health costs arising from skin cancers
and cataracts. The costs of the cutback were between $20 billion and $40 billion, based on
the projected growth of CFC use. Unilateral action on the part of the USA would result in
substantial net benefits, making such action a dominant strategy. In fact, the benefit–cost
ratio was overwhelmingly favorable; thus, the USA had little choice but to cut its CFCs.
Moreover, the USA, the major user and producer of CFCs, was highly motivated to assume
a leadership position in getting other countries to mimic its efforts. If other major CFC users
joined US efforts, then US net benefits from its cutback would increase greatly. In fact, a
subsequent study showed that other large producer and consumer countries faced similar
positive net benefits from cutting their CFCs (Barrett, 2003, p. 229).
Curbing ozone depleters is a pure GPG since a thicker layer provides nonexcludable benefits to the world. Moreover, the protection from ultraviolet-B radiation is nonrival among
countries. Efforts at curbing ozone-depleting substances are cumulative in their influence, resulting in a summation aggregator where each reduced ton of CFC emissions is a perfect substitute for a reduced ton from elsewhere. Some exposure variations result at different
latitudes until mixing occurs in the stratosphere during the springtime. There is consequently
a demand difference based on geographical considerations, with higher-latitude countries
experiencing greater exposures to radiation before the stratospheric mixing is complete.
Because the main producer and consumer countries are in these high latitudes, this bolstered
their incentive to reduce CFC emissions.
Table 1 displays global agreements to control ozone-depleting substances. This universal
action, where all 197 countries (including the EU) ratified all protocols, suggests that other
factors must have overcome the usual impediments associated with GPG provision.
The first ozone shield agreement is the Vienna Convention, framed two months before the
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ENVIRONMENTAL COOPERATION AND TREATIES
Table 1. Treaties controlling ozone-depleting substances
Treaty/Number of
ratifiers
Datesa
Notable accomplishments
Vienna
Convention
197 ratifiers
Montreal Protocol
197 ratifiers
22 Mar 1985
22 Sep 1988
Mandated ratifiers to study the harmful effects of CFC
emissions on ozone layer.
16 Sep 1987
1 Jan 1989
London
Amendment
197 ratifiers
27–29 Jun 1990
10 Aug 1992
Copenhagen
Amendment
197 ratifiers
23–25 Nov 1992
14 Jun 1994
Montreal
Amendment
197 ratifiers
Beijing
Amendment
197 ratifiers
15–17 Sep 1997
10 Nov 1999
Progressive cuts, rising to 50% of 1986 levels, in the
consumption and production of five CFCs. The production and consumption of three halons frozen. A
framework that allowed for periodic amendments
and adjustments. Multilateral Fund to be established
to help developing (Article 5) countries to limit their
ozone-depleting substances.
Cuts for 15 CFCs increased to 85% of 1986 levels and
eventually eliminated. Increasing cuts imposed on
three halons, carbon tetrachloride, and methyl
chloroform. Contained nonbinding cuts on HCFCs, a
main substitute for CFCs. More assistance pledged to
developing countries.
Accelerated the phasing out of 15 CFCs (by 1996), 3
halons, carbon tetrachloride, and methyl chloroform.
Explicit cuts to HCFCs. HBFCs and methyl bromide
entered to list of controlled substances.
Phased out the use of methyl bromide. List of controlled
depleters increased to 94.
3 Dec 1999
25 Feb 2002
Bromochloromethane controlled. Better controls developed for ozone depleters.
a
The first date is when the treaty was enacted, while the second date is when it was ratified.
Sources: Barrett (2003), Fridtjof Nansen Institute (1996), and UNEP (2015) at http://ozone.unep.org/en/trea
ties-and-decisions.
discovery of the ozone hole by the British Antarctic Survey. Given the scientific certainty
that CFCs depleted the ozone layer, and given the EPA reports on the net gains from reducing CFCs, it is not surprising that the Montreal Protocol was framed even before the ratification of the Vienna Convention. The Montreal Protocol is noteworthy because it
mandated significant CFC cutbacks, allowed for periodic adjustments, and established the
Multilateral Fund to assist developing countries. Additionally, the treaty controlled imports
of ozone-depleting substances from nonparties to the treaty to address the leakage problem.
Over the next thirteen years, four amendments—London, Copenhagen, Montreal, and
Beijing—to the Montreal Protocol allowed for more rapid cutbacks and the addition of
more controlled substances. Most notably, hydrochlorofluorocarbons (HCFCs) and hydrobromochlorofluorocarbons (HBFCs), two of the initial substitutes for CFCs, joined the list
of controlled substances. To replace HCFCs and HBFCs, hydrofluorocarbons (HFCs) were
T. SANDLER
351
developed for air-conditioning, insulating foams, and other applications. These HFCs do
not deplete the ozone layer but are GHGs that would eventually raise concerns today.4
The amendment process underscores how a treaty can start modest and progress with time.
Much less and slower progress is anticipated had the treaty’s initial mandate been too
grand, since fewer countries would have viewed signing as yielding a net benefit. As a consequence, the minimum participation threshold would have taken longer to achieve.
The atmospheric concentration of carbon tetrachloride and methyl chloroform began to
fall in 1994, while CFC-11 and CFC-13 started to decline in 1997. CFC-12 atmospheric
concentration began leveling off around 1997 (World Resources Institute, 2000, Table
AC.3, p. 285). Most notably, the decline of atmospheric gaseous chlorine—the main culprit
of ozone depletion—began in 1994. Thus, the Montreal Protocol started to have its intended effect shortly after it entered into force, leading to an ozone shield recovery that
benefited even the current generation for its altruism.
The Montreal Protocol proves that standard notions of collective action need not hold.
Many considerations support this treaty’s amazing achievement (Morrisette et al., 1990;
Benedick, 1991; Sandler, 1997; Barrett, 2003). First, ozone-depleting emissions were relatively concentrated in just a few countries—i.e., the USA, Japan, and the former Soviet
Union accounted for half of CFC emissions—when ozone depletion came into the spotlight.
In 1989, just twelve countries were responsible for almost 80% of these depleters (World
Resources Institute, 1992, Table 24.2). Emission reductions by these countries would have
a significant effect that could not be undone by other countries in the medium term owing
to a lack of production capacity elsewhere. This lack of capacity, bolstered by a treatymandated import ban of goods containing CFCs, meant that the leakage concern was addressed. Second, the EPA study suggested that primary polluters would benefit from CFC
cutbacks so that their dominant strategy was to reduce emissions. Third, the USA—the
main consumer and producer country—assumed an advocate role for treaty ratification.
Fourth, no country benefited from a thinner ozone layer. Fifth, commercial interests in
CFC production were concentrated in just sixteen countries in 1987 (Morrisette et al.,
1990). In the USA, only five chemical companies produced CFCs, with DuPont having a
49% market share (Morrisette et al., 1990, p. 57). These diversified companies5 had already developed CFC substitutes in the form of HCFCs and HBFCs so they would gain
handsome profits from the phaseout of CFCs. In short, no commercial interests would
lobby the legislature against the Montreal Protocol. Sixth, the scientific evidence supported
the view that CFCs harmed the ozone layer, thus removing the main uncertainty inhibiting
action. Experimental evidence shows that sufficient uncertainty about the onset of dire consequences inhibits collective action (Barrett, 2014). Seventh, there is some immediate reversibility of ozone shield thinning, so that the current generation would reap some gain
(World Meteorological Organization, 1998, 2013). Eighth, developing countries received
selective incentives (delayed cutbacks, no trade block, and promised future assistance) that
made participation a dominant strategy. Ninth, decision makers focused on the benefits rather than the costs of reducing their use of ozone depleters. This mind-set may have
4 In 2015, there was the North American proposal for the Montreal Protocol that HFCs be eventually
phased out to address their GHG concern. This is a graphic illustration of how IEAs need to be
linked in some instances—see Young’s (2011) IEA recommendations.
5 For example, less than 2% of DuPont’s production was CFCs (Morrisette et al., 1990, p. 15).
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ENVIRONMENTAL COOPERATION AND TREATIES
followed from the dire consequences associated with the thinning ozone layer. Finally, relatively few activities resulted in ozone shield thinning.
4. Climate change
The contrasting global case to the Montreal Protocol is the Kyoto Protocol, meant to
reverse the mounting accumulation of GHGs in the atmosphere. The failure of the Kyoto
Protocol is reflected, in part, by the rise in GHGs emissions in which ‘the period 1990 to
2011 saw a 30% increase in radiative forcing—a measure of the warming effect on climate—because of increased atmospheric concentrations of GHGs’ (World Meteorological
Organization, 2013, p. 3).
There is a growing scientific consensus that man-made GHGs contribute to climate
change. ‘A 2010 paper in the Proceedings of the National Academy of Sciences of the
United States. . .concluded that 97–98% of the most active climate researchers support the
reality of human-induced climate change’ (World Meteorological Organization, 2013,
p. 1). Despite the apparent resolution of this etiology uncertainty, numerous other uncertainties remain. The impact of GHG accumulation on the earth’s mean temperature remains uncertain. The first, second, and third reports of the Intergovernmental Panel on
Climate Change (IPCC) predicted temperature change ranges of 2–5˚C, 1–3.5˚C, and 1.4–
5.8˚C, respectively, in 2100 from a doubling of CO2 atmospheric concentrations (Barrett,
2003, p. 364).6 There are also vastly different predictions in terms of the rise in sea level,
the extent of droughts, the severity of storms, the productivity of agriculture, the position
of the jet stream, the movement of ocean currents, the potential extinction of species, and
other climate-induced effects.
Similar to ozone shield protection, reducing GHGs accumulation in the atmosphere is a
GPG. If reduced GHGs limit temperature and sea level rises, then everyone is affected regardless of which countries curbed their carbon footprint—i.e., such consequences are nonexcludable. Moreover, the benefits that one country received from reduced GHG
accumulation do not rival those experienced by other countries. A summation aggregator
applies in which cumulative atmospheric emissions of GHGs consist of the sum of all countries’ actions. Thus, the public good properties of curbing ozone depleters and reducing atmospheric GHGs are identical.
At the Earth Summit in 1992, the UNFCCC was framed; it entered into force in 1994
(UNFCCC, 2015).7 The UNFCCC mandated scientific study that resulted in the Kyoto
Protocol on 11 December 1997 to limit GHG emissions. This protocol entered into force
on 16 February 2005. Annex I countries were required to reduce their emissions by about
5% of their 1990 levels between 2008 and 2012. There are many undesirable features of
Kyoto, even though it allegedly used the Montreal Protocol as a template. First, developing
countries were exempted from making cutbacks insofar as most of the atmospheric stock of
GHGs had been emitted by rich industrial countries prior to 1997. Although this exemption
was instrumental in getting an agreement, the exemption is particularly worrisome today
because GHG emissions from China, India, and Brazil continue to grow at rapid rates. In
6 Some of these temperature variations are due to the cooling effects of sulfur pollutants that reflect
sunlight. This opposing influence to climate change again underscores that pollution problems’
IEAs are not independent.
7 Facts in this paragraph are drawn from UNFCCC (2015).
T. SANDLER
353
fact, China now has a larger carbon footprint than the USA. Second, a major emitter, the
USA, did not ratify Kyoto because no limits were placed on China, India, and other growing developed countries (Bossetti and Frankel, 2012; Olmstead and Stavins, 2012, p. 69).
A few major emitters ratified and later dropped out—Australia, Canada, and Russia
(Harvey, 2012). Third, there is no enforcement mechanism if mandated cutbacks are not
met (Barrett, 2003; Bossetti and Frankel, 2012). Punishment entailed being given stiffer cutbacks in the next commitment period, which permits countries to forestall continually their
obligations. Fourth, unlike the Montreal Protocol, there is no continual mandated cutback
commitment; rather, there are discrete periods of commitment that must be renegotiated.
Fifth, there is little done to avoid the leakage problem, where activities with large carbon
footprints are transferred to countries with no treaty obligation. The Kyoto Protocol has no
trade bans to address leakages. Given the myriad activities that emit GHGs, such a trade
ban would not have been feasible for the Kyoto Protocol. Leakage is a much more difficult
problem to address for GHGs than for CFC emissions. Sixth, Kyoto’s mandated reduction
during 2008–2012 only affected a small fraction of GHG emissions owing to exemptions
and nonratifiers (UNEP, 2013, p. 10). In contrast, the Montreal Protocol required that ratifiers with cutback responsibilities represented a sizable threshold level of CFCs emissions
before entering into force. This was de facto not the case for the Kyoto Protocol and is one
major reason why it has been so unsuccessful to date.
The Montreal Protocol was intended to be a blueprint for the Kyoto Protocol; however,
Barrett (2003, Chapter 15) highlighted essential similarities and differences between the two
treaties. I want to go beyond his comparison and underscore differences in terms of collective action. Unlike ozone depletion, the emissions of GHGs virtually involve every country
through the many different activities that create GHGs. Thus, exempting some major emitters from any responsibility, while perhaps equitable, made it difficult for the Kyoto
Protocol to achieve much progress in reducing atmospheric accumulation of GHGs. In the
case of large developing countries, their carbon footprint was destined to grow rapidly,
thereby limiting the impact on GHG accumulation derived from the net GHG reductions by
Annex I countries. Contrary to the ozone shield, it is extremely expensive for rich countries
to lighten the developing countries’ burdens to reduce their GHGs. These rich countries will
have significant costs to reduce their own GHGs. In addition, climate change will give rise
to gainers and losers, unlike a thinning ozone layer. Potential gainers will be countries whose
growing season lengthens and whose rainfall increases. Potential gainers will wait until this
uncertainty is resolved; thus, it is not surprising that Canada left the Kyoto Protocol. In the
case of climate change, there were initially few viable commercial substitutes for many
carbon-emitting processes. This is gradually changing as solar, wave, and wind power
become more commercially viable.8 There are many more uncertainties that characterize climate change than characterize ozone depletion. For some key countries, the net benefits
from cutting GHGs are negative, especially when present value considerations are taken into
account, since costs are immediate and benefits are in the distant future (Nordhaus, 2007).
This then means that not ratifying is a dominant strategy for these countries, which robs the
world of leadership by some major emitters. A discount rate (e.g., hyperbolic), which weighs
future benefits higher, may rectify this concern, but countries have not adopted such a rate.
There is also an intertemporal reversibility concern regarding climate change that
thwarts collective action. The residency of GHGs in the atmosphere may be centuries long
8 The recent crash in oil prices will temporarily work against this commercial viability.
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Table 2. Contrasting considerations affecting ozone shield depletion and climate change
Ozone shield depletion
Ozone-depleting emissions were
concentrated in relatively few
countries, so a small coalition was
needed.
Developing countries were not
large users of ozone shield depleters; it is relatively cheap to assist them to switch to
nondepleting substances. It is not
expensive to shore up weak links.
Every country is harmed by a thinning stratospheric ozone layer.
Commercial gains from substitutes
were present.
Resolved uncertainty in terms of
process and consequences.
Dominant strategy for some key
polluters was to curb ozonedepleting substances.
There was leadership by key polluters, given positive net benefits
from curbing CFCs.
There is significant intertemporal
reversibility of shield thinning
within 50 years.
Decision makers were more informed about benefits than costs.
Relatively few activities added to
ozone shield depletion.
Little leakage concern existed that
could be easily addressed by trade
restrictions.
Climate change
Virtually every country added to GHG emissions, so
a large coalition of active participants was needed.
Developing countries are a growing source of GHGs;
it is relatively expensive to help them curb their GHG
emissions. It is very expensive to shore up weak links.
There are gainers and losers from climate change.
In recent years, there are commercial gains from substitutes (e.g., solar and wind power).
Still unresolved uncertainty in terms of processes and
consequences.
Dominant strategy for most key polluters was not to
curb their GHGs unless more dire consequences
arose.
There was a lack of leadership by most key polluters,
given perceived negative net benefits from curbing
GHGs.
There is virtually no intertemporal reversibility
within 50 years, given GHGs’ atmospheric residency.
Decision makers were more informed about costs
than benefits.
Many activities added to the accumulation of GHGs.
Significant leakage concern existed that could not be
addressed with trade restrictions.
so that today’s efforts to reduce GHG emissions will not have any noticeable influence for
up to 50 years or more (Nordhaus, 1991). Unlike ozone depletion, the current generation
may be insufficiently motivated to invest in reducing GHG emissions. Because treaties are
ratified by elected officials, who are most concerned about the next election period, there is
ample reason to be pessimistic about whether they will be sufficiently altruistic. For climate
change, these decision makers have focused on costs rather than benefits. Another collective
action concern involves the many activities that contribute to the accumulation of GHGs;
even the use of HFCs to address ozone shield depletion adds to the accumulation of GHGs.
These activities mean that many substitutes with smaller carbon footprints must be created,
which raise costs and involve many countries. Leakage is also a concern because the Kyoto
Protocol has no feasible trade ban on products whose manufacture emits great quantities of
carbon (Busnell et al., 2008).
T. SANDLER
355
Collective action concerns for climate change are almost polar opposites of those for
ozone depletion. By way of summary, Table 2 displays the corresponding collective action
differences.
Before moving to the regional acid rain problems, it is instructive to consider briefly the
likely collective action implications of the Paris Agreement in addressing the shortfalls of the
Kyoto Protocol. The key features of the Paris Agreement are as follows: the nationally determined response to climate change; the failure to distinguish Annex I countries; developed
countries’ responsibility to assist developing countries’ mitigation efforts; and the national
inventory reports of anthropogenic GHG emissions and sinks (UNFCCC, 2016). Although
the agreement implores countries to assume ambitious emission-reducing efforts, the resulting efforts are likely to be Nash responses, which have not addressed the GHG emission
problem to date. Moreover, by asking countries to increase their pledged emission reduction
over time, the Paris Agreement sets up a strategic incentive to start reductions as modest as
possible. These same perverse incentives are behind the failure to invest in new greenpromoting technologies (Buchholz and Konrad, 1994; Battaglini and Harstad, 2016). Under
the agreement, developing countries now have a responsibility to cut their GHG emissions,
which may assuage the reluctance of the USA to assume an active commitment. However,
the time frame for when developing countries must become active participants is not specified. If their participation is put off too long, then some developed countries may become
disenchanted with the agreement. The financing of hundreds of billions of dollars to assist
developing countries will give rise to a free-rider problem unless some fair (and enforceable)
assessment scheme, like the one used to fund UN Peacekeeping Operations, is put into place.
However, the latter involves a small fraction of the funds required of rich countries to assist
developing countries under the Paris Agreement. Thus, the willingness and ability of rich
countries to fund mitigation and adaptation in developing countries remain to be seen, given
the huge sums that are involved. The required national inventory reports are likely to be beyond the capability of many countries unless assisted. Countries failing to meet their pledges
have an incentive to be less than forthright about their inventory. In short, the success of the
Paris Agreement is far from certain.
5. Contrasting acid rain problems
This section contrasts the treaty and collective action prognoses for two localized regional
public goods (RPGs)—sulfur- and nitrogen-based acid rain. Much faster and fuller progress
has characterized reducing sulfur-based acid rain. Both acid rain problems have similar etiology: airborne sulfur and nitrogen oxides (NOX) emissions from various sources combine
in the troposphere with water vapor and ozone, thereby forming sulfuric acid and nitric
acid, respectively. These acids later fall as dry or wet deposits, thereby degrading lakes, rivers, coastal waters, forests, soils, and man-made structures. The harmful consequences of
these deposits stem from the resulting increased acidity (lower pH) of soils and watersheds.
Both acid rain problems have the same public good properties. Acid rain is nonexcludable—a recipient country cannot limit its depositions from other countries’ airborne
pollutants. Moreover, control measures provide nonexcludable benefits to all countries in
these emissions’ pathway. Depositions are, however, completely rival: ten tons of sulfur
emitted from country A that fall on country B are ten tons that cannot fall on any other
downwind countries. All airborne pollutants must eventually fall on some country or at
sea. A weighted-sum aggregator applies because a country’s location, size, and prevailing
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ENVIRONMENTAL COOPERATION AND TREATIES
Fig. 1. Transport matrix
winds partly determine where pollutants will fall, as captured by the transport matrix. This
aggregator underscores the importance of spatial considerations, often associated with regional flow pollutants.
Treaties aimed at controlling sulfur and NOX were first considered in the late 1970s and
early 1980s. For the proper historical perspective, I examine emission sources in 1980. The
sources of sulfur emissions were 47.8%, power plants; 37.4%, industry; 10%, residential
and commercial demands; 3.7%, cars and trucks; and 1%, miscellaneous. In comparison,
sources of NOX emissions were 53.6%, cars and trucks; 23.5%, power plants; 15.4%, industry; 6.1%, residential and commercial demands; and 1.3% miscellaneous (Organization
for Economic Cooperation and Development, 1990). Greater efficiency and conservation
can control both sulfur and NOX emissions. Sulfur emissions can be further controlled
through the burning of low-sulfur coal and oil and the use of flue-gas desulfurization for
power plants (Wolfson, 2008). To limit NOX emissions, low-nitrogen fuels (i.e., natural
gas) are cost-effective. Other control means rely on low-NOX burners, combustion staging,
gas recirculation, and flue-gas recirculation (World Bank Group, 1998).
Once airborne, sulfur and NOX emissions can remain aloft for days before being deposited downwind. Because sulfur is heavier than NOX, it remains aloft for a shorter time
and generally travels a shorter distance, thereby falling nearer to its source (Alcamo and
Runca, 1986). Large countries receive more of their own sulfur and NOX emissions as acid
rain than small countries. For large countries, self-pollution provides a strong (country-specific) incentive to cut emissions.
In Fig. 1, a transport matrix captures the dispersion of sulfur and NOX from their sources to their final resting places. Emitting countries are placed in the matrix’s columns, while
recipient countries are displayed along the matrix’s rows. Countries are ordered in a westto-east fashion consistent with prevailing winds, so that country 1 is the western-most
country and country n is the eastern-most country. Each country must be assigned to a column and to a row, since each country serves as both an emitter and a recipient. The number
of countries in the matrix corresponds to those in a region facing a common acid rain problem. Alternatively, this set of countries may be the relevant treaty participants. Matrix
entries—the Aij s—denote the percentage of country j’s emissions deposited on recipient
country i. If all emissions are fully deposited among this set of countries and none fall at
sea, then the sum of each column must total 100%. If, however, some emissions fall at sea
or else are deposited outside these n countries, then column sums are less than 100%. For
T. SANDLER
357
Europe, the column totals for sulfur are near 100%, which is not the case for NOX
(Eliassen and Saltbones, 1983). Given the west-to-east ordering of countries, the largest Aij
entries are below and along the diagonal of the matrix. Diagonal elements, Aii s, denote selfpollution and represent an important incentive for limiting a country’s own emissions. The
transport matrix captures the weights in the associated weighted-sum aggregator (Murdoch
et al., 1997).
If these countries reduce their individual emissions by qj for j ¼ 1; . . . ; n; then recipient
n
P
country i receives Qi ¼
Aij qj in reduced depositions. The latter expression consists of
j¼1
reduced own depositions, Aii qi , and reduced spillover depositions,
n
P
Aij qj .9 With
j6¼i
European abatement efforts in place, western countries receive smaller reduced depositions
than their eastern counterparts, which are downwind from more polluters. If, e.g., Aik is
60% and country k limits its NOX discharges by 100 tons, then country i imports 60 fewer
tons of wet and dry NOX deposits from country k. Thus, Eastern European countries are
more motivated than far-western countries to join an IEA for acid rain in order to receive
reduced spillover depositions.
For countries to act rationally in regards to acid rain, they must learn their regional
transport matrices for different pollutants. In 1977, the Cooperative Program for
Monitoring and Evaluation of the Long-Range Transmission of Air Pollutants in Europe
(henceforth, EMEP) was instituted to calculate these transport matrices for sulfur, NOX,
and volatile organic compounds (VOCs). VOCs are hydrocarbon particulates that cause
surface ozone. The EMEP transport matrix is determined annually by a fine grid of
European monitoring stations. By removing uncertainty, EMEP paved the way for a convention and subsequent protocols to limit sulfur, NOX, VOCs, and other air pollutants in
Europe. These measured matrices showed that eastern and large countries had the most to
gain from curbing acid-rain-inducing emissions. Thus, the five western-most European
countries—Iceland, Ireland, Portugal, Spain, and the UK—have understandably still not
ratified the protocols controlling sulfur (UN Economic Commission for Europe, 2015).
EMEP first measured the sulfur transport matrix, then the NOX transport matrix, and last
the VOCs matrices.
In March 1983, the initial treaty was the Long-Range Transboundary Air Pollution
(LRTAP) Convention, which made possible a sequence of protocols as indicated in Table 3.
The first major transboundary air pollution treaty was the Helsinki Protocol, which mandated sulfur emission reductions of 30% of 1980 levels to be achieved by at least 1993. The
subsequent Sofia Protocol only required that NOX emissions be rolled back to 1987 levels
by the conclusion of 1994. Like the Montreal Protocol, these two acid rain protocols set in
motion a process whereby subsequent protocols required larger cutbacks as previous targets
were surpassed. Thus, the Oslo Protocol of August 1998 required further sulfur emission
reductions, ranging up to 80% of 1980 levels. Unlike the earlier protocols, Oslo tailored
9 To derive each country’s demand for reducing its emissions,Qi is introduced into the country’s utility function, which also contains a private good and taste variables. Utility is then maximized subject to a budget constraint and the best-response level of spillover depositions (Murdoch et al.,
2003).
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ENVIRONMENTAL COOPERATION AND TREATIES
Table 3. Select European treaties on acid rain and air pollution
Treaty
Entry into force
Provision
Long-Range
Transboundary Air
Pollution
Convention
(LRTAP)
Helsinki Protocol
16 Mar 1983
Mandated scientific investigation and evaluation
European air pollutants.
2 Sep 1987
Sofia Protocol
14 Feb 1991
Oslo Protocol
5 Aug 1998
Geneva Protocol
29 Sep 1997
Aarhus Protocol
23 Oct 2003
Aarhus Protocol—
Heavy Metals
29 Dec 2003
Gothenburg Protocola
17 May 2005
Reduce sulfur emission by 30% of 1980 level by 1993
or as soon as possible. Allows for more stringent requirements in the future.
Mandated reduction in NOX to 1987 levels by 31
December 1994.
Required further sulfur reductions. Tailored emission
reductions based on the signers’ costs of abatement.
Cutbacks ranged from 0% to 80% of 1980 levels.
Reduced Volatile Organic Compounds (VOCs) by at
least 30% by 1999 using a base year between 1984
and 1990.
Reduced or eliminated 16 Persistent Pollutants that
included 11 pesticides, two industrial chemicals, and
three by-product contaminants.
Reduced emissions of cadmium, lead, and mercury
below 1990 levels, or some base year between 1985
and 1995.
Reduced sulfur dioxide, NOX, ammonia, VOCs, and
fine particulates in 2010 from 1990 levels. Assigned
reductions vary by country according to costs of
abatement and health consequences. The revised
protocol allowed for further reductions in 2020.
a
Framed on 30 Nov 1999, ratified on 17 May 2005, and revised on 4 May 2012. The revision has not entered
into force yet.
Source: UN Economic Commission for Europe (2015) at http://unece.org/env/lrtap/status/lrtap_s.html.
emission reductions based on the signers’ abatement costs in an attempt to minimize abatement costs (Finus and Tjøtta, 2003).10 The Geneval Protocol for reducing VOCs was ratified ten years after the Helsinki Protocol because of the difficulty in monitoring VOCs and
formulating a treaty for numerous substances. In 2003, an initial Aarhus Protocol curbed
16 persistent pollutants, while a second Aarhus Protocol reduced the emissions of heavy
metals. The Gothenburg Protocol continued to enhance the reduction of sulfur and NOX.
This protocol also restricted some VOCs, including black carbon or soot, and accounted
for abatement cost differences.
My current task is to explain why treaty-based actions to curtail sulfur emissions outpaced those to reduce NOX even though both efforts possess essentially the same public
good properties. In Table 4, the self-pollution percentages for sulfur and NOX are indicated
10 Abatement costs are minimized when marginal abatement costs are equalized across treaty
ratifiers.
T. SANDLER
359
Table 4. Sulfur and nitrogen oxides self-pollution percentages for Europe, 1990
Country
Austria
Belgium
Bulgaria
Czechoslovakia
Denmark
Finland
France
East Germany
West Germany
Greece
Hungary
Ireland
Italy
Luxembourg
Netherlands
Norway
Poland
Portugal
Romania
Spain
Sweden
Switzerland
Soviet Union
UK
Yugoslavia
Sulfur self-pollution %
Nitrogen oxides self-pollution %
44.49
28.47
64.74
39.86
24.16
52.52
52.18
36.90
44.31
77.73
38.03
53.45
65.11
21.67
26.88
57.69
49.72
62.95
59.55
80.53
55.56
50.30
93.18
57.50
59.59
16.97
4.40
32.37
14.06
4.56
26.70
30.95
9.20
19.29
45.77
15.07
14.29
39.42
0.00
5.69
28.78
23.07
30.69
32.14
59.94
27.69
18.38
91.04
19.95
33.88
Source: Sandnes (1993).
for 1990 (Sandnes, 1993). For every country, sulfur was associated with greater selfpollution than NOX. Thus, countries have a much greater private incentive to curb sulfur
than NOX—Murdoch et al. (1997, 2003) showed that these Aii s are a positive and significant determinant of the demand for emission reduction. Since sulfur travels a shorter distance from their sources than NOX, more sulfur falls within the LRTAP Convention
countries’ territory (Sandnes, 1993), which motivated these countries to ratify protocols
reducing sulfur. This is less true for NOX, which travels, in part, beyond convention territory or falls at sea. Hence, treaties ensued in a slower fashion with less stringent mandated
cutbacks for NOX.
Another factor that favored sulfur over NOX treaty formation is that sulfur polluters are
primarily easy-to-control public utilities and industries, while NOX polluters are primarily
hard-to-control vehicle and truck owners. The use of these vehicles is cyclical, making them
more difficult to control during boom periods. Because the publication of the sulfur transport matrices far preceded that for NOX, this faster resolution of uncertainty reduced transaction costs (Libecap, 2014) and promoted treaty ratification for sulfur. Countries not only
knew their self-pollution but also their importation of sulfur pollutants from elsewhere way
before they knew these things for NOX. Rather substantial sulfur cutbacks from 1980 levels
had been already achieved by 1985 prior to the Helsinki Protocol. In fact, more than a
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ENVIRONMENTAL COOPERATION AND TREATIES
20% cutback in sulfur emissions had been attained by 1985 (Murdoch et al., 1997). On
average, countries were well on their way to the required 30% reduction that later characterized the Helsinki Protocol.11 When the Sofia Protocol was framed, there had been no
cutbacks in NOX from 1980 levels. Thus, the Sofia Protocol only required the maintenance
of 1987 NOX emission levels. As greater cutbacks had been attained with respect to sulfur,
the Oslo Protocol increased the amount of cutbacks. Voluntary cutbacks for sulfur surpassed mandated reductions more quickly than those of NOX, so this was reflected in subsequent treaties.
6. Contrasting global and regional treaties
There are some worthwhile contrasts to draw between the paired global and regional treaties considered here. The two global treaties involve stock pollutants, while the two regional
treaties concern flow pollutants. Generally, stock pollutants require more time before measurable reversibility is experienced from pollution reduction. In contrast, actions to limit flow
pollutants can yield immediate health and other benefits. Thus, the current generation is typically more motivated to address regional flow pollutants than global stock pollutants.
Moreover, the discount rate is less of a concern for flow pollutants, thereby limiting transaction costs. Another difference concerns the homogeneity of the participants wherein regional
pollution concerns are confronted by countries with spatial propinquity, shared culture,
common environmental concerns, and similar tastes. These factors reduce transaction costs
and promote IEA framing and ratification. Transaction costs are also reduced because past
interactions on other issues allow countries in the same region to know one another’s preferences and biases. By involving all countries, global agreements are more difficult to consummate unless there are relatively few necessary participants, who view benefits and costs in a
similar fashion, as was true for limiting ozone depletion. Obviously, global treaties concern
more countries than regional treaties; as such, transaction costs are greater for global treaties. Global agreements rely on the United Nations and its agencies, while regional treaties
rely on regional trading blocs and common markets. Another difference concerns the presence of related problems. At the regional level, there are usually many related problems that
can benefit from the process that the first protocol sets in motion. Young (2011, p. 19856)
viewed the presence of interplay among problems as a facilitator of more effective IEAs.
This was clear from the LRTAP protocols that followed the Helsinki Protocol for a wide
range of air pollutants, including heavy metals. The presence of related problems opens up a
wider set of mutually advantageous agreements for the negotiating countries. At the global
level, problems are more distinct with different sets of key polluters—e.g., many key GHG
polluters did little to deplete the ozone layer. Thus, trades across global problems were more
restricted. Global treaties typically involve far greater selective incentives than regional
agreements owing to the number of potential weakest-link countries, whose action must be
brought up to an acceptable level. This is a particular worry for the reduction of GHG emissions. Such selective incentives are costly and require a funding agreement among rich countries. Finally, leakage is a much greater concern for global pollution problems. Policing this
leakage is also more arduous at the global level.
11 This suggests that the Helsinki Protocol primarily codified Nash behavior for many countries.
The exceptions are those countries that were pressured into matching others’ cutbacks
(Murdoch et al., 1997).
T. SANDLER
361
7. Concluding remarks and IEA design principles
There are a number of points to highlight. First, publicness properties of global and regional pollutants are insufficient to predict the prognosis of treaty making. Pollutants with
identical public good properties may display drastically different treaty outcomes. Many
other considerations guide collective action possibilities with respect to IEAs. Second,
some IEAs do not initially gain much over Nash behavior, as seen from the LRTAP protocols (Murdoch et al., 1997). Nevertheless, these agreements are still useful by setting in
motion a procedure for enhancing emission cutbacks in the future and by bringing straggler countries along. Third, regional environmental agreements must account for spatial
factors that capture emissions pathways. Fourth, the resolutions of uncertainty regarding
etiology, gainers and losers, self-pollution, or pollution importation promote the framing
and ratification of IEAs. Fifth, the progression of the Montreal Protocol and the LRTAP
protocols shows that IEAs should begin in a modest fashion and be made stricter, if warranted, with time. This insight is consistent with Young’s (2011) viewpoint that IEAs
change over time after their formation—i.e., they are dynamic organisms. If this change is
to ensue, then the treaty must be designed in such a way as to be ratified by a sufficient
number of countries to limit free riding (Battaglini and Harstad, 2016). Once ratified, the
IEA can be made more stringent as information and technology improve, as was the case
for the Montreal Protocol and the LRTAP protocols. Sixth, climate change still has numerous hurdles to overcome. While noble in its intent, the Paris Agreement is apt to fail to
confront many collective action challenges in terms of free riding and leakages, given its
emphasis on nationally determined GHG reductions. Funds needed to foster mitigation
and adaptation in developing countries raise free-riding concerns among rich countries unless an enforceable assessment scheme is devised. Seventh, the progress shown for the
LRTAP protocols is due to the absence of bundling of different pollutants in the Helsinki,
Sofia, and Oslo Protocols. Bundling is apt to slow progress down to the most difficult pollutant to measure and control. Eighth, if affordable, selective incentives or punishments
can serve to provide some countries a net benefit from participating; this was true of developing countries for the Montreal Protocol owing to the Multilateral Fund and delayed
emission reductions. These selective incentives have proven to be much more costly and
burdensome for the Kyoto Protocol. Finally, future treaty making must account for the
interrelationships among controlled pollutants—e.g., airborne sulfur pollutants reflect
sunlight and curb atmospheric heating. Consistent with Young (2011), accounting for
these interrelationships will make for more effective IEAs but at a raised transaction cost.
The latter will mean that the extent of interrelationship included in treaty framing is itself
an economic decision.
Acknowledgements
The author has profited from comments provided by Michael Finus and two anonymous referees
on an earlier draft. Sole responsibility rests with the author.
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