A proposal for the reform of the Kyoto Protocol: escape clauses under cost uncertainty

A reform to the Kyoto Protocol that allows signatories to avoid achieving the target level of abatement upon payment of a fine, would achieve two goals. First, it would defuse one U.S. objection to the agreement: the concern that the cost of achieving the target might turn out to be extremely high. Second, unlike other cost-reducing measures (such as trade in pollution permits) it would increase the equilibrium number of signatories in a non-cooperative participation game. We study the participation game under an escape clause using both a Nash Equilibrium and the concept of a Stable Set when nations are