Voluntary Participation in International Environmental Agreements and Authority Structures in a Federation

Abstract

We examine how the voluntary participation decision in international environmental negotiations affects negotiation outcomes when every country is a federation. Each country consists of two autonomous regions: one is a polluter region and the other is a nonpolluter region. In the model, each country can freely decide whether to participate in a negotiation, which determines the abatement level of pollution (the level of public goods). The participation decision of a country and the negotiation (if the country decides to participate) are either conducted by the federal government of the country or are delegated to the regional government of the polluter region. We show that in combination with the voluntary participation decision, the endogenous choice of authority by the federal governments has a coordination-game property; that is, there are at least two equilibria and one equilibrium provides a higher welfare than the other.