DIVISION OF ECONOMICS STIRLING MANAGEMENT SCHOOL Uncertainty and Climate Treaties: Does Ignorance Pay?

Uncertainty and learning play an important role in addressing the problem of climate change. In stylized game-theoretic models of international environmental treaty formation, which capture the strategic interactions between nations, it has been shown that learning usually has a negative impact on the success of cooperation. This paper asks the question whether this negative conclusion carries over to an applied multiregional climate model. This model captures the large heterogeneity between different world regions and considers not only uncertainty about the benefits but also about the costs from climate mitigation. By exploiting differences in costs and benefits between regions and allowing transfers to mitigate free-rider incentives, we derive much more positive conclusions about the role of learning. JEL-Classification: D62, D80, Q54