Metropolitan Climate Negotiations as a Decentralized Public Good Game Theory, Evidence, and Institutional Implications

Overview & Synopsis

We develop a game-theoretic model of decentralized climate mitigation among metropolitan areas. Cities choose heterogeneous levels of abatement effort in the presence of global environmental externalities, local cost structures, and reputational incentives shaped by participation in transnational municipal networks. We show that the Nash equilibrium is characterized by systematic under-provision of mitigation effort relative to the social optimum. We extend the baseline framework to incorporate coalition formation and climate club dynamics, highlighting the conditions under which partial cooperation can emerge, yet full efficiency remains unattainable without additional selective incentives. We further provide a calibration using urban emissions data and indicators of network participation, documenting substantial heterogeneity in mitigation effort and persistent gaps between decentralized and socially optimal outcomes. The results suggest that transnational urban networks improve coordination but are insufficient to fully internalize global climate externalities.