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On the Timing of Climate Agreements

Author:
Schmidt, Robert C., Strausz, Roland
Source:
Environmental and resource economics 2015 v.62 no.3 pp. 521-547
ISSN:
0924-6460
Subject:
climate, environmental policy, greenhouse gas emissions, models
Abstract:
A central issue in climate policy is the question whether long-term targets for greenhouse gas emissions should be adopted. This paper analyzes strategic effects related to the timing of such commitments. Using a two-country model, we identify a redistributive effect that undermines long-term cooperation when countries are asymmetric and side payments are unavailable. The effect enables countries to shift rents strategically via their R&D efforts under delayed cooperation. In contrast, a complementarity effect stabilizes long-term cooperation, because early commitments in abatement induce countries to invest more in low-carbon technologies, and create additional knowledge spillovers. Contrasting both effects, we endogenize the timing of climate agreements.
Agid:
4656915