Dynamic cooperation with tipping points in the climate system

Tipping points in the climate system can stabilize climate treaties; the stabilizing effect, however, vanishes when the location of the threshold is sufficiently uncertain (Barrett, 2013). We demonstrate that in a dynamic setting, additional welfare gains can improve the prospects of cooperation. In our model, intertemporal efficiency gains result from abatement costs that are convex in each period. While non-cooperative countries tend to postpone their abatement efforts "until the last minute" as a result of the free-rider incentive, cooperation allows countries to allocate their abatement efforts efficiently over time. We show that cooperation often improves the outcome substantially, and arises endogenously in the model. Our main theoretical results are confirmed by experimental evidence.