1. Introduction
During the negotiations that followed the Kyoto-agreement, and especially at
the meetings in The Hague, the EU and the USA seemed to follow different
paths regarding the alleviation of the climate change problem. According to
Brandt and Svendsen (2002), the Kyoto agreement imposed unnecessarily high
costs of implementing the targets. In particular, the hot air issue and free trade
restrictions, together with the strong incentives to free ride on agreements to
alleviate the climate change problems, explain well why the United States
dropped out of the Kyoto agreement.
But why did the EU not drop out too? One explanation could be that the EU
feels morally obliged to act on the basis of their responsibility for the present
stock of anthropogenic greenhouse gasses in the atmosphere (see e.g. Woerd-
man, 2001). However, we offer an alternative explanation, which gives a more
down to earth economic rationale for the EU to push forward ambitious green-
house gas (GHG) reductions. The reason, it will be argued, is that the EU, and
especially Denmark, has large potential first mover advantages if other coun-
tries face demanding GHG reduction obligations as well. These first mover ad-
vantages stem primarily from the EU knowledge in renewable energy sources,
and for Denmark, primarily windmills. We argue that the subsidising of wind-
mill production in Denmark has given this country a leading position in the
windmill industry, and, as a consequence, an incentive to pursue a cooperative
strategy in what otherwise resembles a prisoners’ dilemma like problem.
Besides the effects of subsidies, the EU has also achieved a first-mover advan-
tage compared to the United States because energy use has been more strictly
regulated in the EU than in the United States. In other words, most exports of
green technologies will be from the EU. That the EU is actively pursuing the
promotion of renewable energy sources has also been seen at the summit in Jo-
hannesburg where: ”The European Union has been pushing for a target of mak-
ing 15% of energy come from sources such as windmills, solar panels and