Environmental issues don't stop at borders. They're global problems that need global solutions. From air pollution to climate change, countries must work together to tackle these challenges that affect us all.

But cooperation isn't easy. Rich and poor nations often have different priorities. Some countries might try to freeload off others' efforts. Despite these hurdles, international agreements and market-based approaches offer hope for addressing our shared environmental concerns.

International Environmental Issues

International Externalities

• International externalities occur when one country's actions impact the environment or welfare of another country
  • Negative externalities harm the environment or welfare of another country (transboundary air or water pollution)
  • Positive externalities benefit the environment or welfare of another country (preserving biodiversity or carbon sequestration in forests)
• Environmental impacts include degradation of shared natural resources (oceans, atmosphere, biodiversity), increased global greenhouse gas emissions contributing to climate change, and loss of ecosystem services and environmental amenities

Cooperation Challenges

• High-income nations may prioritize environmental protection, while low-income nations may prioritize economic development
  • Low-income nations often lack financial and technological resources to address environmental issues
• High-income nations have historically contributed more to global environmental problems due to longer industrialization
  • Low-income nations may argue high-income nations should bear greater responsibility for addressing these issues
• Costs of addressing environmental issues may fall disproportionately on low-income nations, while benefits accrue more to high-income nations, creating a sense of injustice and reluctance to cooperate
• Free-rider problem: some countries may be tempted to benefit from others' environmental actions without contributing their fair share, undermining the effectiveness of international environmental agreements

Mitigation Strategies

• International agreements
  1. Multilateral environmental agreements (MEAs) set common goals and standards for environmental protection (Paris Agreement on climate change)
  2. Trade agreements incorporate environmental provisions and incentives (environmental chapters in free trade agreements)
  3. Challenges include ensuring participation, compliance, and enforcement of agreements
• Market-based approaches
  1. Carbon pricing puts a price on greenhouse gas emissions through carbon taxes or cap-and-trade systems, encouraging countries and businesses to reduce emissions and invest in clean technologies
  2. Payments for ecosystem services (PES) compensate countries or communities for protecting and preserving ecosystems that provide global benefits (REDD+: Reducing Emissions from Deforestation and Forest Degradation)
  3. Green finance mobilizes private and public investment in environmentally sustainable projects and technologies (green bonds, sustainable development funds)
• Combining international agreements and market-based approaches
  • Using market-based mechanisms within the framework of international agreements (international carbon markets under the Paris Agreement)
  • Leveraging international agreements to create enabling environments for market-based approaches (capacity building and technology transfer provisions in MEAs)