Cooperative R&D investments and licensing breakthrough technologies: International environmental agreements with participation game

Abstract

This study examines international environmental agreements (IEAs) with cooperative R&D, which can bring about a substantial reduction in greenhouse gas emissions. To achieve a large IEA size consisting of more than four countries, we propose a novel method of cooperative R&D investment and recovery and a licensing fee for the adoption of advanced technology, by applying the mechanism of a joiner’s gain function. The core findings of this study reveal that: (i) a large agreement can be achieved by considering R&D investment, R&D recovery, and a licensing fee; (ii) the diffusion process of advanced technology is clarified; (iii) non-investors’ adoption of an advanced abatement technology can be prevented by setting a licensing fee and instead, they participate and invest in R&D via agreement; (iv) a full participation state can be more easily sustained than any other number of participants. Our approach shows the diffusion process of advanced abatement technology after R&D. Consequently, this paper fills a research gap in cooperative R&D methods and the diffusion process of advanced technologies and provides a hopeful prospect for achieving full participation in IEAs and a large reduction in GHG emissions by way of cooperative R&D.