DP4412 Economic and Environmental Effectiveness of a Technology-based Protocol

Author(s): Barbara Buchner, Carlo Carraro
Publication Date: June 2004
Keyword(s): agreements, climate, incentives, policy, technological change
JEL(s): C70, H00, H40, O30
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4412

This Paper provides a first applied game theory analysis of a technology-based climate protocol by assessing: (i) the self-enforcement (namely, the absence of incentives to free ride) of the coalition that would form when countries negotiate on climate-related technological cooperation; (ii) the environmental effectiveness of a technology-based climate protocol. The analysis is carried out using a model in which endogenous and induced technical changes are explicitly modelled and in which international technological spillovers are also quantified. The results of our analysis partly support Barrett?s and Benedick?s conjecture. On the one hand, a self-enforcing agreement is more likely to emerge when countries cooperate on environmental technological innovation and diffusion than when they cooperate on emission abatement. Technological cooperation ? without any commitment to emission control ? may not lead to a sufficient abatement of greenhouse gas concentrations, however.