Uncertainty and climate treaties: Does ignorance pay?

Uncertainty and learning play an important role in the management of many environmental and resource problems and in particular in climate change. In stylized game-theoretic models of international environmental treaty formation, which capture the strategic interactions between nations, learning usually has a negative impact on the success of cooperation. We use a richer climate model that captures the large heterogeneity between different world regions and considers uncertainty about the benefits and costs from climate mitigation. By explicitly exploiting differences between regions and allowing transfers to mitigate free-rider incentives, we derive much more positive conclusions about the role of learning.

► Uncertainty and learning play an important role in climate change.
► Learning can have a negative impact on the success of international treaty formation.
► Numerical simulations with climate model shows that such negative outcomes are rare.
► A clever transfer scheme can make a significant difference to mitigate free-riding.
► Clever transfers can overcome the negative impacts of learning should they occur.