Sinking costs to increase participation technolog

Authors: Johannes Urpelainen

Publish Date: 2013/12/19

Volume: 16, Issue: 3, Pages: 229-240

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Abstract

The role of technology cooperation in international climate policy has drawn considerable attention in recent years This article examines the possibility that an international agreement to deploy clean energy would pave the way to future climate cooperation My gametheoretic analysis shows that even if technology deployment produces mostly private benefits for each country an agreement can increase global pollution abatement efforts If technology deployment allows countries to credibly commit to pollution abatement through sunk costs the international community can form two coalitions One deploys the technology and then abates pollution whereas the other only abates pollution A technology deployment agreement is useful and feasible when the total number of concerned countries is high and technology deployment is very costly but effective in reducing the cost of future pollution abatementSuppose overlinec+1underlinec+cD Consider the deployment participation stage and examine the external stability of any coalition If the coalition has fewer than L members it is clearly irrelevant because they will not deploy even together This case can be ignored If the coalition has more than L members internal stability is clearly violated as shown in the main textSuppose now that the coalition has L or more members I show that external stability is violated To see this consider a nonmember of the deployment coalition that expects to be a member of the Kmember abatement coalition at a subsequent stage of the game Suppose the country labeled i changes strategy and joins the deployment coalition instead The total number of abaters increases from L + K to L + K + 1 At the same time country i’s own cost changes from underlinec+cD to overlinec This means that external stability is violated whenever overlinec+1underlinec+cD

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