Incentives and Enforcement in International Environmental Agreements

Incentives and Enforcement in International Environmental Agreements

Many environmental resources represent global public goods. Individuals cannot reasonably exclude others from using a given environmental resource and the use of the resource by one individual does not diminish it for another (Bodansky, 2012). Due to this feature of environmental resources, their management often requires international governance (Bodansky, 2012). This presents unique challenges because there is no overarching authority on a global level that can require states to participate and uphold agreements.  This results in inadequate enforcement of cooperative actions among sovereign nations on environmental issues (Bohringer, 2003).International environmental agreements are only effective to the extent that they can address this challenge. To be successful, international environmental agreements must include cooperation incentives and be self-enforcing.  International climate treaties have failed in this regard. As a result, they have been ineffective at curbing global emissions of greenhouse gas.

Lack of Cooperation Incentives in Climate Agreements

The Kyoto Protocol was negotiated in 1997 due to growing international concern about the impacts of greenhouse gas emissions (Bohringer, 2003). This treaty commits industrialized states to emission reduction targets with the goal of curbing impacts of global climate change (Bohringer, 2003). Despite the urgency of this goal, the Kyoto Protocol lacks the incentives necessary to promote state cooperation and encourage political buy-in. The projected effects of climate change are uncertain and economists disagree on the proper approach to evaluate the impacts (Bohringer, 2003). This uncertainty makes it challenging for states to determine whether their participation in climate agreements, such as the Kyoto Protocol, would advance their domestic interests.  Countries have incentive to participate in international environmental agreements when their cooperation would make them better off than they would be if they remained uninvolved (Bohringer, 2003). When the benefit of action is unclear, states have incentive to stick with the non-cooperative status quo in order to avoid costs of premature or unnecessary action.
 Additionally, states have more incentive to participate in international environmental treaties when they feel that the costs and benefits of participation are equitably distributed (O’Brien, 2012). Differing ideas of what is equitable have posed obstacles to state cooperation with climate agreements. The interests and fairness ideals of key parties, including the U.S., China, and the European Union, have been critical in shaping negotiation outcomes for climate agreements. (O’Brien, 2012). The Kyoto Protocol established “common but differentiated” state responsibilities and the need for developed countries to curb emissions before developing countries (Clémençon, 2016). The U.S. argued that the increasing emissions of emerging economies like China were not properly accounted for and these nations had an equal responsibility to reduce their emissions under the protocol (Clémençon, 2016).  Ultimately, the United States left the Kyoto Protocol in 2001 followed by Canada, Australia, Japan and Russia (Clémençon, 2016).  The interests of these states with regards to the fairness of the climate agreement eroded their willingness to participate.

Lack of Self-Enforcement in Climate Agreements

Instead of creating motivations to cooperate, the circumstances of many climate agreements create substantial free-rider incentives (Böhringer, 2003).  States that either do not agree to climate treaties or agree but then violate their terms can avoid the cost of participation while benefiting from the efforts of other participating states (Böhringer, 2003). Severe and convincing sanctions are required to reduce free-riding in climate agreements (Bohringer, 2003). However, in the case of the Kyoto Protocol, such sanctions do not exist. There were no repercussions for states that did not sign the agreement and only minor sanctions for states that did not reach emission targets (O’Brien, 2012). The Kyoto Protocol included restriction of trade privileges with non-compliant states. However, this enforcement mechanism was unsuccessful in reducing free rider incentives because it was detrimental to sanctioned states and sanctioning states alike (O’Brien, 2012).  Ultimately, the lack of self-enforcement in the Kyoto Protocol contributed to its ineffectiveness at curbing global greenhouse gas emissions.

Cooperation Incentives in Successful International Environmental Agreements

 The Montreal Protocol on Substances that Deplete the Ozone Layer is considered to be one of the most effective international environmental agreements (Bodansky, 2012). Born from the need to protect the ozone layer from ozone-depleting substances, the success of the Montreal Protocol can be partially attributed to its cooperation incentives. It used a powerful combination of decreasing costs for participating states and increasing costs for non-participating states to promote cooperation (Bodansky, 2012). The Montreal Protocol created incentives for developing countries through the establishment of a Multilateral Fund (O’Brien, 2012). This fund supported developing economies by offsetting the cost of committing to the agreement and complying with its requirements (“Multilateral Fund,” n.d.). Furthermore, the Montreal Protocol used trade restrictions on non-parties making it costly for developed nations not to participate (Bodansky, 2012). Unlike the incentive structure for climate agreements, which creates free-riding incentives, the incentive structure for the Montreal Protocol compelled voluntary state participation.

Similar to the Kyoto Protocol, perceptions of unfairness were an obstacle to state cooperation with the Montreal Protocol. However, the latter was successful in negotiating equitable terms to incentivize cooperation. India and China initially refused to sign the Montreal Protocol until the parties agreed upon a financial arrangement in 1990 (O’Brien, 2012).  Montreal mandated that both developing and developed states reduce their use and manufacturing of CFCs. Unlike Kyoto, the Montreal Protocol was effective in managing the inherent equity concerns of this proposal through differentiated compliance options (O’Brien, 2012).

The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is another international environmental agreement that has been relatively effective. CITES regulates international wildlife trade with the goal of preserving global biodiversity (Carey, 1999). Similar to the Montreal Protocol, the success of CITES is partly a result of its effective cooperation incentives. As CITES was building its membership, it discouraged non-participation through trade embargoes on both party and non-party states that did not comply with the standards of the CITES agreement (Sand, 2013).  Non-cooperating free-rider states were then forced to identify alternative markets or suppliers. As CITES membership grew, non-cooperating states increasingly struggled to find opportunities for external trade (Sand, 2013).

Furthermore, CITES has inherent participation incentives through the financial benefit it affords to some countries. Endangered species protected under CITES provide economic benefits to global communities (“CITES incentives,” n.d.). In some countries, endangered species may support the economy through ecotourism or through the role they play in a critical ecosystem. If these species go extinct, countries could lose critical economic resources. This financial dependence on CITES could also contribute to countries’ willingness to participate in the agreement.

Self-Enforcement in Successful International Environmental Agreements

 Due to their strong participation incentives, both CITES and the Montreal Protocol are mostly self-enforcing with regards to encouraging participation. The enforcement challenge for these treaties is ensuring that participating states do not violate the established agreement. Where the Kyoto protocol had minimal sanctions for states that failed to reach emission targets, CITES and the Montreal Protocol are able to address treaty violators more effectively. In the case of CITES, severe noncompliance is met with a general embargo. This last-resort enforcement action restricts the targeted state from profitable legal export opportunities. The severe economic implications of this sanction are typically enough to elicit compliance (Sand, 2013). Generally, these trade suspensions have been effective in the enforcement of CITES. In 2002, for example, United Arab Emirates pledged reform following a CITES recommendation to halt trade with the country (“CITES incentives,” n.d.).

Conclusion

While a range of factors play a role in the effectiveness of international environmental treaties, enforcement and incentives for participation are critical to success.  Agreements between sovereign states must encourage participation and contain enforcement mechanisms lest they fail in the absence of a central, powerful authority. Climate agreements such as the Kyoto protocol have struggled to achieve the participation and enforcement needed for success.  Both successful and failed agreements offer powerful insights into the driving factors behind effective international environmental agreements. Future improvements to international climate policy may include stronger incentives and sanctions.

References
 

• Bodansky, D. (2012). Whats in a Concept? Global Public Goods, International Law, and Legitimacy. European Journal of International Law, 23(3), 651-668. doi:10.1093/ejil/chs035
• Bohringer, C. (2003). The Kyoto Protocol: A Review and Perspectives. Oxford Review of Economic Policy, 19(3), 451-466. doi:10.1093/oxrep/19.3.451
• Carey, J. E. (1999). Improving the Efficacy of CITES by Providing the Proper Incentives to Protect Endangered Species. Washington University Law Review, 77(4), 1291-1322.
• CITES incentives inspire vital reforms in wildlife management. (n.d.). Retrieved from: https://cites.org/eng/news/pr/2002/020315_caviar.shtml
• Clémençon, R. (2016). The Two Sides of the Paris Climate Agreement. The Journal of Environment & Development,25(1), 3-24. doi:10.1177/1070496516631362
• Multilateral Fund for the Implementation of the Montreal Protocol. (n.d.). Retrieved from http://www.multilateralfund.org/default.aspx
• O’Brien, E., & Gowan, R. (2012, September). What Makes International Agreements Work: Defining Factors for Success. Retrieved February 10, 2019, from https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/7839.pdf
• Sand, P. H. (2013). Enforcing CITES: The Rise and Fall of Trade Sanctions. Review of European, Comparative & International Environmental Law, 22(3), 251-263. doi:10.1111/reel.12037