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A Good Opening: The Key to Make the Most of Unilateral Climate Action

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  • Valentina Bosetti
  • Enrica De Cian

Abstract

In this paper we argue that when a subgroup of countries cooperate on emission reduction, the optimal response of non-signatory countries reflects the interaction between three potentially opposing factors, the incentive to free-ride on the environmental benefits of cooperation, the incentive to expand energy consumption, and the incentive to adopt the cleaner technologies introduced by the coalition. Using an Integrated Assessment Model with a game-theoretic structure we find that the equilibrium abatement of the coalition composed by OECD countries would be moderate, in line with the Pledges subscribed in Copenhagen, but increasing. The mitigation strategy would consist of investments in energy R&D and deployment of cleaner technologies with high learning potentials. International knowledge and technology externalities would facilitate the diffusion of cleaner technologies in non-signatory countries, offsetting the free-riding incentive and reducing their emissions. If the OECD group curbs emissions beyond the optimal equilibrium level, reaching reduction rates between 40 and 45 % below 2005 levels in 2050, the benefits of technology externalities would no longer compensate the effect of lower fossil fuel prices. Our results suggest that a moderate unilateral climate policy could induce a virtuous behaviour in non-signatory countries and that policies promoting the international transfer of technologies and knowledge could represent an effective complement to mitigation targets. Copyright Springer Science+Business Media Dordrecht 2013

Suggested Citation

  • Valentina Bosetti & Enrica De Cian, 2013. "A Good Opening: The Key to Make the Most of Unilateral Climate Action," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(2), pages 255-276, October.
  • Handle: RePEc:kap:enreec:v:56:y:2013:i:2:p:255-276
    DOI: 10.1007/s10640-013-9643-1
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    1. Enrica De Cian & Ilkka Keppo & Johannes Bollen & Samuel Carrara & Hannah Förster & Michael Hübler & Amit Kanudia & Sergey Paltsev & Ronald D. Sands & Katja Schumacher, 2013. "European-Led Climate Policy Versus Global Mitigation Action: Implications On Trade, Technology, And Energy," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 4(supp0), pages 1-28.
    2. Heike Auerswald & Kai A. Konrad & Marcel Thum, 2018. "Adaptation, mitigation and risk-taking in climate policy," Journal of Economics, Springer, vol. 124(3), pages 269-287, July.
    3. Lessmann, Kai & Kornek, Ulrike & Dellink, Rob & Emmerling, Johannes & Eyckmans, Johan & Nagashima, Miyuki & Weikard, Hans-Peter & Yang, Zili, 2014. "The Stability and Effectiveness of Climate Coalitions: A Comparative Analysis of Multiple Integrated Assessment Models," Climate Change and Sustainable Development 163598, Fondazione Eni Enrico Mattei (FEEM).
    4. Francesca Sanna-Randaccio & Roberta Sestini & Ornella Tarola, 2017. "Unilateral Climate Policy and Foreign Direct Investment with Firm and Country Heterogeneity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(2), pages 379-401, June.
    5. Bosello, Francesco & Davide, Marinella & Alloisio, Isabella, 2016. "Economic Implications of EU Mitigation Policies: Domestic and International Effects," EIA: Climate Change: Economic Impacts and Adaptation 234938, Fondazione Eni Enrico Mattei (FEEM).
    6. Bosetti, Valentina & Carraro, Carlo & De Cian, Enrica & Massetti, Emanuele & Tavoni, Massimo, 2013. "Incentives and stability of international climate coalitions: An integrated assessment," Energy Policy, Elsevier, vol. 55(C), pages 44-56.
    7. Carsten Helm & Franz Wirl, 2016. "Climate Policies with Private Information: The Case for Unilateral Action," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(4), pages 893-916.
    8. Kai Lessmann & Ulrike Kornek & Valentina Bosetti & Rob Dellink & Johannes Emmerling & Johan Eyckmans & Miyuki Nagashima & Hans-Peter Weikard & Zili Yang, 2015. "The Stability and Effectiveness of Climate Coalitions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 811-836, December.
    9. Arroyo-Currás, Tabaré & Bauer, Nico & Kriegler, Elmar & Schwanitz, Valeria Jana & Luderer, Gunnar & Aboumahboub, Tino & Giannousakis, Anastasis & Hilaire, Jérôme, 2015. "Carbon leakage in a fragmented climate regime: The dynamic response of global energy markets," Technological Forecasting and Social Change, Elsevier, vol. 90(PA), pages 192-203.
    10. Gregor Schwerhoff & Ulrike Kornek & Kai Lessmann & Michael Pahle, 2018. "Leadership In Climate Change Mitigation: Consequences And Incentives," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 491-517, April.
    11. Marcucci, Adriana & Fragkos, Panagiotis, 2015. "Drivers of regional decarbonization through 2100: A multi-model decomposition analysis," Energy Economics, Elsevier, vol. 51(C), pages 111-124.
    12. Enrica De Cian & Fabio Sferra & Massimo Tavoni, 2013. "The Influence of Economic Growth, Population, and Fossil Fuel Scarcity on Energy Investments," Working Papers 2013.59, Fondazione Eni Enrico Mattei.
    13. Marcucci, Adriana & Turton, Hal, 2015. "Induced technological change in moderate and fragmented climate change mitigation regimes," Technological Forecasting and Social Change, Elsevier, vol. 90(PA), pages 230-242.
    14. Adolfo Maza & José Villaverde & María Hierro, 2015. "Non- $$\hbox {CO}_2$$ CO 2 Generating Energy Shares in the World: Cross-Country Differences and Polarization," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(3), pages 319-343, July.

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    More about this item

    Keywords

    Technology spillovers; Climate change; Partial cooperation; Q54; Q55; C72;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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