Date: 09 May 2012

Can strategic technology development improve climate cooperation? A game-theoretic analysis

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Abstract

Clean technology has figured prominently in recent debates on international climate policy. This article offers a game-theoretic investigation of the possibility and effectiveness of strategic technology development: environmental leaders setting policies that reduce the global cost of clean technology. The game-theoretic model combines technology development and adoption with pollution abatement, and it allows technology costs to differ across countries. The key theoretical findings are as follows. First, free riding is an obstacle to technology development in two ways: countries fail to fully internalize the beneficial effect of technology development on (i) global pollution abatement and (ii) the reduced cost of technology adoption in outsider countries. Second, strategic technology development can be effective when (i) a key group of frontrunner countries prefers to invest in research and development and (ii) many other countries are willing to adopt the new technology. The findings suggest that strategic technology deployment by a group of frontrunners can enable more effective climate cooperation in the future.

I thank Alton Worthington, Scott Barrett, Robert O. Keohane, the anonymous reviewers, the editors, and a seminar audience at Columbia University for valuable advice.