A Least Human-Restrictive GATT Environmental Model at the G-20

Abstract

We investigate binding environmental agreement among the G-20 countries, which could establish principles or minimum standards. We found that an environmental agreement demands strong intangible capital, leadership and flexibility. We argue that the GATT provides a good starting point to the G-20 agreement and defend the use of the bounded rationality approach. First, we carried out panels considering 15 economic and governance variables to observe the relationship between G-20 intangible capital and economic factors. We found that the government balance is the only persistent significant factor. Then, we discuss binding environmental agreement. The analysis showed us the difficulties to cope with free riding, intertemporal preferences, behavioral deficiencies and uncertainty. Thus, we champion a least human-restrictive principle to such an agreement. In the last section, we use Evolutionary Game Theory to observe the main factors relating to a G-20 environmental agreement in which the equilibrium has only environmental friendly firms.