It is often suggested that to achieve cooperation and handle environmental problems, treaties should use mechanisms such as sticks (negative incentives) and carrots (positive incentives), so that States find it attractive to contribute to the greater good. In this regard, Barret proposes a general theory of international cooperation to provide guidance on how to negotiate more effective agreements, which involves restructuring incentives, by balancing positive (carrots) and negative (sticks) incentives. Whereas positive incentives that reward law-abiding behavior of States and prevent violations of international obligations function as a “carrot,” measures such as penalties or sanctions addressing noncompliance situations work as a “stick.” The 1987 Montreal Protocol is usually cited for having successfully combined those two elements by financially compensating developing countries for the incremental costs of complying with the Protocol and, at the same time, by using the threat of trade restrictions to enforce obligations.

Positive incentives can be divided into two major categories: one that involves market-based mechanisms, for example, carbon trading, and one that makes use of nonmarket-based financial resources, such as official development assistance, voluntary contributions from governments, the private sector, and funds under international treaties.