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Is There a First-Mover Advantage in International Climate Policy?

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Dynamic Approaches to Global Economic Challenges

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Abstract

Mitigating climate change requires a globally coordinated effort, yet coordination or even cooperation is hardly found in the climate policy arena. By employing a two-country Overlapping Generations framework, this chapter discusses how economic differences, both among industrialized countries as well as between industrialized countries and emerging economies, may explain different stringency levels in climate policy. The analysis focuses on differences in external balances, technological differences, environmental preferences, and saving rates. Starting with the case of simultaneous policy setting, the focus is then shifted to sequential policy setting. When the industrialized country decides to act as a first mover, this has positive welfare implications for both the industrialized countries and emerging economies; global emissions can however increase or decrease compared to the simultaneous policy setting.

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Notes

  1. 1.

    The model presented here is a combination and extension of Bednar-Friedl and Farmer (2010) and Bednar-Friedl and Farmer (2011). In Bednar-Friedl and Farmer (2010), production technologies differ across countries but preferences do not while in Bednar-Friedl and Farmer (2011) the reverse holds. In Bednar-Friedl (2012), which is the basis for Sects. 5 and 6, both production technologies and preferences differ across countries and saving rates are dissimilar. To keep the model still analytically tractable, we eliminate government bonds and assume instead that capital is internationally mobile.

  2. 2.

    Note that the Nash equilibrium permit levels are not optimal from a global social planner perspective since at the Nash equilibrium \(\mathrm{d}W/\mathrm{d}p =\mathrm{ d}W^{{\ast}}/\mathrm{d}p^{{\ast}} = 0\) while a global welfare maximum demands equal slopes of welfare indifference curves: \(\left (\mathrm{d}W/\mathrm{d}p^{{\ast}}\right )/\left (\mathrm{d}W/\mathrm{d}p\right ) = \left (\mathrm{d}W^{{\ast}}/\mathrm{d}p^{{\ast}}\right )/\left (\mathrm{d}W^{{\ast}}/\mathrm{d}p\right )\).

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Author information

Authors and Affiliations

  1. Department of Economics, University of Graz, Universitätsstraße 15, 8010, Graz, Austria

    Birgit Bednar-Friedl

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  1. Birgit Bednar-Friedl
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Correspondence to Birgit Bednar-Friedl .

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Editors and Affiliations

  1. Department of Economics & Wegener Center for Climate and Global Change, University of Graz, Graz, Austria

    Birgit Bednar-Friedl

  2. Department of Economics, University of Graz, Graz, Austria

    Jörn Kleinert

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Bednar-Friedl, B. (2016). Is There a First-Mover Advantage in International Climate Policy?. In: Bednar-Friedl, B., Kleinert, J. (eds) Dynamic Approaches to Global Economic Challenges. Springer, Cham. https://doi.org/10.1007/978-3-319-23324-6_10

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