Climate solidarity, green trade unions and timing of technological choice

We consider a Cournot duopoly consisting of two geographically separated firms, each associated with a local environmental-friendly trade union that exhibits climate solidarity. In the basic model, firms choose abatement technologies prior to bargaining over wages and employment with the unions. We show that the trade unions would lower the wage with the degree of reciprocal solidarity, providing additional incentives for firms to adopt greener technology and hence improving the social welfare. In the alternative model where trade unions decide the wages prior to the firms’ abatement and employment decisions, the firms always choose the dirtiest available technology while output will increase with the degree of solidarity. These results suggest that establishing the social norm and practice of reciprocal solidarity across trade unions in appropriate manner will help the internalisation of global environmental issues, which could mitigate the global regulation difficulties that require strong cross-border coordination among governments.