Countries often have private information about their willingness to pay for protecting the climate system and their cost of emission reductions. We use a principal-agent model to re-examine the economic case for unilateral action by individual countries, in our case of the principal. We find...

We consider how one party can induce another party to join an international emission compact given private information. Due to multilateral externalities the principal uses her own emissions besides subsidies to incentivize the agent. This leads to a number of non-standard features: Optimal...