Transboundary pollution negotiations : an exploratory study on behavior in international environmental agreements

• Main Authors: Lin, Weixiang, Lim, Ignatius Desmond Peng Zhi, Chen, Cristian Gerard Sheng
• Other Authors: Quah Teong Ewe, Euston
• Format: Final Year Project
• Language: English
• Published: 2015
• Subjects: DRNTU::Social sciences::Economic theory::Microeconomics
• Online Access: http://hdl.handle.net/10356/62456
• Institution: Nanyang Technological University

IEAs have greatly increased in number over the past decades and are crucial as a means to tackle the worsening problem of transboundary pollution, with individual behaviors of involved countries underlying the success or failure of IEAs. This study explores the behaviors of individual countries negotiating in International Environmental Agreements through setting up a hypothetical scenario-based IEA survey. The full survey consists a total of 7 scenarios reflecting different transboundary pollution setups wherein participants take on roles as a negotiator representing a country and are asked to respond to a series of numerical questions differing in the type of responses required, such as the amount they propose to pay and the amount they demand to receive, as well as the terms of negotiation such as the amount of damages being inflicted by other countries and the amount of damages inflicted to other countries. Subsequently the findings are collated and reconciled with existing IEA and behavioural economics theories to provide insights into individual negotiator behaviour in real world IEAs. The key findings include :i. In a 1 polluter 1 victim situation, there is an efficient outcome from Coase bargaining.ii. Wealth effects are present when the budget provided for negotiations are adjusted.iii. The presence of domestic solutions to mitigate the externality of pollution complicates negotiations as people are willing to bear a higher cost than to pay a polluter.iv. When there is more than 1 victim sharing the cost of paying to stop another country polluting, more people are likely to free ride when given the opportunity. v. It is easier to reach a successful agreement when there are lesser countries involved in an IEA vi. There is suggestive evidence of an inverse relationship between number of countries and the gains from cooperation in a successful agreement. vii. Country negotiators in IEAs exhibit social preferences and seem to demonstrate inequity aversion. viii. Individuals seem to exhibit a high degree of self-serving bias where they consistently demand to receive more than what they propose to pay under the four different bidirectional pollution cases with the exception of the 3 country case of equal damage being inflicted upon one another, possibly signifying a larger coalition size effect on fairness considerations. Even though the findings are based upon the absence of interaction and exclusion of transaction costs, it provides interesting insights into the innate behaviours and demands of individual countries participating in IEAs and could perhaps provide direction for future studies to work towards conducting more realistic simulations of real world IEAs that allow for interaction, the manipulation of variables of uncertainty whereby costs and benefits are unknown, as well as the inclusion of transaction and information costs.