tional incentives and the institutions needed to achieve climate change objectives. We then consider specific U.S. policies that could be directed toward low- and middle-income countries where emissions are rising most rapidly, and we illustrate the strategic and contingent nature of the policy problem with three scenarios for future action among these countries. Finally, we examine the roles of both competition and cooperation in encouraging international action to limit climate change.

U.S. Policies and International Incentives

The outcome of efforts to limit climate change will depend on other countries’ decisions, but the United States has considerable ability to affect other countries’ behavior. As a result, the situation involves strategic interaction; that is, nations’ policies and ability to cooperate with one another depend not only on their own preferences and resources, but on leaders’ beliefs about others’ preferences, resources, and strategies (Schelling, 1960; Waltz, 1979). For the United States to engage with other countries most effectively, it needs a strategy for crafting policies that affect the incentives faced by other governments.

The incentive problem is profoundly affected by the fact that climate change policy relates to a common pool resource (or “global commons”): a resource that it is difficult or impossible to exclude others from enjoying but that is degraded by use. In this case, the desired global commons is an atmosphere with a lower concentration of GHGs than would otherwise be the case. Common pool resources are not self-managing; promoting sustained cooperation requires formal institutions involving rules and social norms (Ostrom, 1990).

International institutions (such as the United Nations Framework Convention on Climate Change [UNFCCC] and the Kyoto Protocol) provide principles, rules, and practices around which expectations converge. When credible, they affect beliefs about others’ behavior, provide focal points for action, and therefore can affect incentives and outcomes even without having coercive power over states. They can facilitate cooperation by reducing the costs of making and enforcing agreements, providing information, enhancing the credibility of statements by governments and other actors, and providing for the delegation of authority (Hawkins et al., 2006; Ikenberry, 2000; Keohane, 1984). Since these institutions rarely have coercive power, however, they depend on favorable configurations of state preferences and are subject to change when prevailing preferences change.1


Empirical support for the essential role of international institutions in global environmental policy is provided by data from the International Energy Agency (IEA) Database Project (http://iea.uoregon.edu/):

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