Cleaner Technologies and the Stability of International Environmental Agreements

Abstract: This paper shows that, if countries are farsighted when deciding whether to defect from a coalition, then the implementation of cleaner technologies may jeopardize the chances of reaching an international environmental agreement. The grand coalition may be destabilized by the implementation of cleaner technologies, ultimately resulting in higher global emissions and lower global welfare. We further show that the higher the stock of pollution at the instant when the cleaner technology is implemented, the more likely that the above mechanism unfolds. We examine a reduction in the emission per output ratio as well as measures that enhance the natural rate of decay of stock pollutants.