Keywords: CO2 trading, carbon leakage, political economy theory, Kyoto Protocol, free riding, group size, Samaritan', s Dilemma, delegation of power, agent, World Trade Organization, WTO, collective action theory, developing countries, USA, United States, carbon trading, carbon emissions, carbon dioxide
Soft or tough guys in Kyoto? Free-rider incentives and the Samaritan's Dilemma
One crucial precondition for the overall achievement of the Kyoto Protocol by 2010 is the participation of the USA. According to political economy theory, big countries have the strongest incentives to provide global collective good provisions. Reality, however, does not seem to follow this logic, as the USA dropped out in The Hague (2000). One main argument for the USA to drop out was the risk of carbon leakage, i.e. the fact that investments would shift to big developing countries such as China and India. We apply the approaches of collective action theory by Olson (1965) and the Samaritan's Dilemma game by Buchanan (1975) to this problem. The policy recommendation on how to make the USA rejoin the agreement is that other countries should support the USA in its 'tough' policy towards big developing countries, i.e. to define preselected rules for participation and delegate the decision-making power to a neutral international institution such as the World Trade Organization. This initiative may both induce big developing countries to join the Kyoto Protocol and may also ensure that the USA will rejoin and that all Annex B countries will reach their stated target levels.