Induced innovation and international environmental agreements: evidence from the ozone regime

Global environmental problems are some of the most pressing issues that humanity is facing. There are few examples of success at resolving them; the fight to protect the ozone layer is one of them. This paper provides evidence that the Montreal Protocol’s restrictions on chlorofluorocarbons (CFCs) triggered a substantial increase in research and innovation on alternatives to ozone-depleting molecules. By showing that a low-ambition but binding agreement such as the Montreal Protocol did encourage the development of technological solutions, the paper suggests such agreements are potent tools that dynamically improve the benefit-cost equation of environmental protection and may therefore also be useful to dealing with current problems such as climate change.