| 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 benefits of cooperation, the incentive to expand the demand of fossil fuels, and the incentive to adopt cleaner technologies introduced by the coalition. Using an Integrated Assessment Model with a game theoretic structure we find that cost-benefit considerations would lead OECD countries to undertake a moderate, but increasing abatement effort (in line with the pledges subscribed in Copenhagen). Even if emission reductions are moderate, OECD countries find it optimal to allocate part of their resources to energy... |
