Development of low-carbon power technologies and the stability of international climate cooperation

This paper explores the effects of the technological development of key low-carbon power technologies (photovoltaic (PV), wind, and carbon capture and storage (CCS)) on the stability of global climate cooperation under several assumptions about climate-related damage. The methodology combines cooperative game theory with a global computable general equilibrium (CGE) model allowing us to endogenize testing of stability of the global coalition and to include macroeconomic effects. Global cooperation is found to be stable only under mean or pessimistic assumptions about the development of key low-carbon power technologies and when damage is severe. If the technological development is favorable or climate damage is not severe, the gains from global cooperation are not sufficient to compensate for mitigation costs, because a nonglobal coalition of willing countries can then achieve emission reductions close to the global optimum. Finally, our findings support establishing nonglobal 'climate clubs' to overcome the lack of global cooperation in international climate policy.