The Role of Uncertainty and Learning for the Success of International Climate Agreements

Transnational externalities (e.g. transboundary pollution, trade, contagious diseases and terrorism) warrant coordination and cooperation between governments, but this proves often difficult. One reason for meager success is the public good character of many of these economic problems, encouraging free-riding. Another reason one might suspect is uncertainty, surrounding most environmental problems, and in particular climate change. This provides often an excuse for remaining inactive. Paradoxically, some recent papers have concluded just the opposite: the “veil of uncertainty” can be conducive to the success of international environmental cooperation. In this paper, we explain why and under which conditions this can be true. However, taking a broader view, we argue that these unfavorable conditions are rather the exception than the rule. Most important, we suggest a mechanism for those situations in which learning has a negative effect on the success of cooperation which removes this effect or even turns it into a positive effect. Our results apply beyond the specifics of climate change to similar problems where cooperation generates positive externalities.