Prisoners to me, me, me

Environment and Statecraft
October 24, 2003

Every now and again, a treatise appears that alters the way we see events.

Scott Barrett's Environment and Statecraft is one such work. The book, more than a decade in preparation, is a craft of inventiveness, meticulous research, intellectual insight and surprise. His goal is to explain why some international agreements about shared natural resources work but most fail. Barrett argues that failure means the agreements in question achieve little more than the counterfactual, that is to say, they do no better than what would have happened anyway.

An essential reason for this depressing outcome is that participants to an agreement have a strong incentive to behave self-interestedly in a context where they have to gauge how others will behave. The classic "prisoner's dilemma" goes a long way to explaining why.

Despite the fact that cooperation makes all parties better off, participants tend to opt for choices that fail to maximise collective gain.

Each participant ends up less well-off than they would have been with full cooperation. By and large, international agreements fail to exploit the benefits of cooperation. The international context differs from within-nation agreements where there is a third party - usually the government - to enforce cooperation. The examples of international agreements that do succeed, such as the Montreal Protocol on the emission of ozone-depleting chlorofluorocarbons, are instructive. They tend to define situations where the benefits of cooperation greatly exceed costs to the individual party.

The first reason international agreements fail, then, is because of the context in which they have to be negotiated. International negotiators cannot be blamed for that state of affairs, although anyone engaged in that process would do well to scrutinise Barrett's book to secure a better understanding of what they are up against. Politicians might also learn not to raise false expectations among the public about what agreements will achieve.

The second reason is poor design, and here is a case for the ascription of blame. In an analysis of several hundred international agreements, Barrett details an almost endless list of mistakes. A huge number of agreements lack credible mechanism for compliance.

Many readers will be drawn to Barrett's comparison of the successful Montreal Protocol and his predicted failure of the Kyoto Protocol on greenhouse-gas control. The former succeeds because there are massive public health gains from compliance, because of a comparatively modest cost to industrialised countries, because developing countries are compensated for switching out of CFCs (so-called side payments) and because the compliance mechanism is a powerful one - trade sanctions. In contrast, Kyoto does little or nothing to curtail global warming. The failure of the US to sign up removes the single largest greenhouse-gas emitter from the agreement. Yet President George W. Bush's non-signature makes sense in terms of self-interest. The costs of controlling domestic emissions in the US would be significant or, at least, are perceived to be significant, and the US would be faced with the prospect of financing the necessary side payments to developing countries to encourage them to join in future protocols. And if developing countries do not participate, Kyoto is doomed anyway - they are the fastest-growing emitters. But Kyoto is a mess in other respects, too. Barrett shows that it was a mistake to copy Montreal's features and to assume they could be equally successful in a climate-change context. The benefit-to-cost ratio is more debatable, the compliance mechanisms are little short of pathetic, and significant side payments beyond those envisaged in the clean development mechanism are unfeasible.

Barrett is not wholly negative. He makes some positive suggestions for better future protocols based on setting technology standards.

Apart from the immense coverage of past agreements, the main feature of Barrett's analysis is his use of game theory. Indeed, anyone wanting an introduction to this branch of mathematics and economics is unlikely to do better than work through the examples in this book. Game theory deals with precisely those issues that matter for the design of a cooperative solution to international problems: the conditions under which people will cooperate and those needed to make that agreement produce better outcomes than the status quo.

Barrett's book is probably one of the most important publications in the past few decades on global environmental problems. For students of politics, economics and the environment, and for negotiators and politicians, this is a book to be carried round like a Bible. If I had written it, I would retire content that I had made a real difference.

David Pearce is professor of environmental economics, University College London and Imperial College London.

Environment and Statecraft: The Strategy of Environmental Treaty-Making

Author - Scott Barrett
Publisher - Oxford University Press
Pages - 4
Price - £.50
ISBN - 0 19 925733 7

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