Competing Climate Policies

Abstract

In this thesis, I investigate the strategic provision of a public good in a dynamic setting. The public good in question is reduced emissions of greenhouse gases, which limits the public bad of climate change. Emissions can be reduced both through demand- and supply-side policies, and countries differ in which type of policy they prefer. Two stylized models are developed, with consumer countries that consume fossil fuels, but produce none, and producer countries that produce fossil fuels, but consume none. In the first model, a producer country that does not care about the climate interacts with consumer countries that do. It is shown that even though the producer country does not care about the climate, it reduces production in order to limit emissions. In the second model, both producer and consumer countries care about the cli- mate. It is shown that the nature of future climate policies matters for emissions today. Between countries that prefer the same type of climate policy, the dynamic public good problem is aggravated. However, between countries that prefer different types of policies, the dynamic public good problem is alleviated.