Discussion Paper Series, University of Heidelberg, Department of Economics 591
The success of global climate policies over the coming decades depends on the diffusion of 'green' technologies. This requires that international environmental agreements (IEAs) and trade-related intellectual property rights (TRIPs) interact productively.Using a simple and tractable model, we highlight the strategic reduction in abatement commitments on account of a hold-up effect. In anticipation of rent extraction by the innovator signatories might abate less than non-signatories turning the IEA 'brown'. Self-enforcing IEAs have fewer signatories and diffusion can reduce global abatement under TRIPs. Countries hosting patent holders extract rents from TRIPs, but may be better off without them.
International climate policy diffusion of innovations intellectual property rights hold-up problem