Global environmental problems and the strategic choice of technology

Abstract

Reductions of environmentally harmful emissions are often a public good in a global context. For strategic reasons, countries may adopt a technology with high per unit costs of emission reduction, even if a technology with lower per unit costs is available at no extra cost. They thereby commit themselves credibly to not reducing emission much in the future. In a game of private voluntary provision of emission reduction, this commitment will make other countries increase their emission reductions. Also, in the case where countries cooperate in the future, such commitment gives a country a strategic advantage, because it shifts the disagreement point in a favorable direction. (author's abstract)