Abstract
The role of technology cooperation in international climate policy has drawn considerable attention in recent years. This article examines the possibility that an international agreement to deploy clean energy would pave the way to future climate cooperation. My game-theoretic analysis shows that even if technology deployment produces mostly private benefits for each country, an agreement can increase global pollution abatement efforts. If technology deployment allows countries to credibly commit to pollution abatement through sunk costs, the international community can form two coalitions. One deploys the technology and then abates pollution, whereas the other only abates pollution. A technology deployment agreement is useful and feasible when the total number of concerned countries is high and technology deployment is very costly but effective in reducing the cost of future pollution abatement.
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Notes
“EU Leaders Reach New Climate Deal.” BBC News December 12, 2008.
The linear payoff structure simplifies exposition, but all key results would continue to hold even if the payoff K was replaced by a value function V(K), where V would be an increasing, but strictly concave function of the number of abaters K.
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Acknowledgments
I thank the editor of Environmental Economics and Policy Studies, two anonymous reviewers, Scott Barrett, Matthew Kotchen, and the conference participants for detailed comments and advice.
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Previous draft of this manuscript was presented at the 2011 Yale Conference on International Environmental Agreements.
Mathematical appendix: optimality of deployment
Mathematical appendix: optimality of deployment
Suppose \(\overline{c}+1>\underline{c}+c^{D}\). Consider the deployment participation stage and examine the external stability of any coalition. If the coalition has fewer than L members, it is clearly irrelevant because they will not deploy even together. This case can be ignored. If the coalition has more than L members, internal stability is clearly violated, as shown in the main text.
Suppose now that the coalition has L or more members. I show that external stability is violated. To see this, consider a non-member of the deployment coalition that expects to be a member of the K-member abatement coalition at a subsequent stage of the game. Suppose the country, labeled i, changes strategy and joins the deployment coalition instead. The total number of abaters increases from L + K to L + K + 1. At the same time, country i’s own cost changes from \(\underline{c}+c^{D}\) to \(\overline{c}\). This means that external stability is violated whenever \(\overline{c}+1>\underline{c}+c^{D}\).
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Urpelainen, J. Sinking costs to increase participation: technology deployment agreements enhance climate cooperation. Environ Econ Policy Stud 16, 229–240 (2014). https://doi.org/10.1007/s10018-013-0075-5
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DOI: https://doi.org/10.1007/s10018-013-0075-5