International Environmental Agreements as Evolutionary Games

This paper applies evolutionary game theory to international environmental agreements (IEAs). Contrary to stage game models (Barrett in J Theor Politics 11:519–541, 1999, Eur Econ Rev 45:1835–1850, 2001), in an evolutionary equilibrium (EE) no signatory prefers to be outside the IEA and the EE is robust to trembles. With two populations, there is a unique interior EE when there is decreasing returns to abatement and small asymmetry in the externality differences across populations. At the interior EE, transfers from the poor to the rich can increase payoffs for all nations, but come at the expense of greater payoff inequality. Transfers can also eliminate the basin of attraction for the payoff inferior EE with decreasing returns to abatement and large asymmetry. Thus IEAs, such as the Kyoto Treaty, predicated on the polluter-pays and ability-to-pay principles may result in Pareto inferior outcomes.