On the Timing of Climate Agreements
On the Timing of Climate Agreements / Robert C. Schmidt and Roland Strausz. Humboldt-Universität zu Berlin, July 2014, 42 p. (SFB 649 Discussion Paper 2014-044)
Authors’s 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.