Trust and CO2 Emissions: Cooperation on a Global Scale

In this paper we show that the within-country cooperative culture sustained by trust affects international cooperative behaviour. We focus on the role of social norms shared by trustworthy individuals and theoretically show how such norms can create incentives for trustworthy individuals to cooperate with foreigners even when they are unsure of the trustworthiness of their foreign partners via reputation effects. We then provide empirical evidence in the context of climate change that an increase in trust leads to more global cooperation measured by larger reductions in CO2 emissions. We establish causality by obtaining a time-varying measure of inherited trust from the trust that descendants of US immigrants have inherited from their ancestors. The measure allows us to have country fixed effects and thus to study how the evolution of trust is correlated with the change in CO2 emissions over time. Inherited trust turns out to be a significant factor that explains the changes in CO2 emissions across 26 countries worldwide including most European countries. The results are robust even when we control for economic growth, industrial composition of the economy, trade patterns and political environment. Our findings provide a plausible explanation for the existence of national, regional and local level mitigation efforts in the absence of a global agreement for climate change, which is difficult to reconcile with the conventional theory of collective action. JEL Codes: Q54, N50, Z10 ∗Carattini: Yale School of Forestry & Environmental Studies, Yale University and Grantham Research Institute, London School of Economics [[email protected]]; Jo: Corresponding author, Department of Geography and Environment and Grantham Research Institute, London School of Economics [[email protected]]. Jo thanks Antoine Dechezleprêtre for his invaluable guidance and support. We would also like to thank Marco Casari, Francesco Nava, Ulrich Berger, Karlygash Kuralbayeva and Alessandro Tavoni for their helpful comments. All errors are our own.