Conditional Clauses in GHG Abatement Legislation - An Economic Explanation

Abstract: The aim of this research is to create an understanding for the motivation to include conditional clauses regarding foreign countries in domestic green house gas (GHG) abatement legislation. In addition I aim to explain how these clauses change the strategic environment, in an interaction with the purpose to reach an international environmental agreement (IEA) to combat global warming. I chose this subject because I view a successfully established IEA as the most important way to combat global warming. Conditional clauses in The American Clean Energy and Security Act of 2009 (The Clean Act) are the empirical cornerstones of my research, as the US is the most important actor in this process in character of being the largest industrialized polluter. Conditional cooperation preference, a behavioral economic concept, in combination with the Chicken game is used to explain conditional clauses in The Clean Act. Conditional cooperation explains cooperation under certain conditions as opposed to merely free riding, unilateral cooperation and non-cooperation. Reciprocity, suggested as a decision rule or mechanism stimulating preferences for conditional cooperation in this case, explains how decision makers are affected by concern with fairness in decisions and how they might retaliate in an irrational way to achieve this. The conditional clauses in The Clean Act might partly be explained by conditional cooperation preferences held by legislators, motivated by the mechanisms reciprocity. It can also be explained as a rational strategic choice through a game of Chicken, and not as a fairness preference.