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Leadership and Climate Policy

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  • Torben K. Mideksa

Abstract

This paper examines leadership in relation to supplying a global public good. Both the Kyoto Protocol and the Paris Agreement encourage the developed countries to take a lead in reducing emissions. Does a country benefit from taking a lead? When does leadership improve global welfare? The answer depends on how transparent the leader’s abatement technology is for the followers. When there is no transparency and the leader has to abate to signal the abatement cost, leadership reduces global welfare unless the crowding-out effect is weak. If there is transparency and the follower can benefit from technology spillover effects, leadership reduces global welfare unless the spillover effect is sufficiently large. I find that transparency reduces global welfare unless the spillover effect is sufficiently large and the difference in abatement cost is small. This theory can rationalize the European Union’s stance on climate policy while also explaining the perceived failure of the Kyoto Protocol.

Suggested Citation

  • Torben K. Mideksa, 2021. "Leadership and Climate Policy," CESifo Working Paper Series 9054, CESifo.
    • Handle: RePEc:ces:ceswps:_9054
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    More about this item

    Keywords

    global public goods; international relations; leadership;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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