| Global environmental problems share several features in common that militate against effective, coordinated international action to address the concern, including: tremendous uncertainty, the technical and complex nature of the problem, a long time horizon, diffuse benefits coupled with concentrated costs, and distributional asymmetries. Typically, international cooperation is analyzed as a collective action problem---the incentives to free-ride on the contributions of the others override the mutual benefits from cooperative action, which paradoxically undermines provision of the collective good. However, the insights generated from analysis of the collective action problem are of limited use to many global environmental problems due to the perception that mutual benefits from cooperation simply do not exist. In these cases, much of the literature on international cooperation is silent.; Climate change is one example of international negotiations on a global environmental problem that is best described as state of deadlock, in which benefit, mutual or not, is absent. I propose a global climate policy based on the precautionary principle paradigm that demonstrates the potential for mutual benefits to cooperation under conditions of uncertainty. Combining the precautionary saving model from economics and the Dynamic Integrated Climate and Economy integrated assessment model by William Nordhaus, I develop a formal model of the precautionary principle paradigm in the case of climate change. Using this dynamic optimization model, I show how, in the case of climate change, precautionary orientation towards future, uncertain climate change damages has the potential to transform the deadlock structure by revealing mutual benefits to cooperation.; Importantly, the underlying principle is intuitive. The central idea is that uncertainty itself imposes an additional penalty beyond simple risk aversion that induces precautionary action to hedge against unexpected future negative outcomes. Uncertainty about future outcomes provides an additional incentive for cooperation by offering a premium on the expected benefits to cooperation based on asymmetries in positive versus negative shocks. In other words, the disproportionate effect of negative shocks may be adequate to displace the advantages of non-cooperation. If the precautionary motive is sufficiently strong, it may be sufficient to transform deadlocked negotiations by stimulating mutual benefits from cooperation. |
