The economics of leadership in climate change mitigation

Which kind of reaction can a nation or group of nations expect when leading by example in climate policy? This synthesis article describes possible positive reaction mechanisms from different fields of economics, some of which have scarcely been linked to climate economics previously. One effect may be behavioural, a reaction motivated by fairness, reciprocity, or norms. Second, other nations may interpret the leader's action as a signal on his preference or the value of the objective and adjust their own policy based on the new information. Third, the leader may provide a service to other nations, which decreases their costs and risks. The followers could benefit by learning successful policies, adopting technologies, and obtaining information on the cost of environmental policy. All of these mechanisms have in common that the leader sets an example with the intention of motivating others to contribute to the public good.