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Endogenous technology and tradable emission quotas

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  • Golombek, Rolf
  • Hoel, Michael

Abstract

We study an international climate agreement that assigns emission quotas to each participating country. Unlike the simplest models in the literature, we assume that abatement costs are affected by R&D activities undertaken in all firms in all countries, i.e. abatement technologies are endogenous. In line with the Kyoto agreement we assume that the international climate agreement does not include R&D policies. We show that for a second-best agreement with heterogeneous countries, marginal costs of abatement differ across countries. In other words, the second-best outcome cannot be achieved if emission quotas are tradable.

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Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 30 (2008)
Issue (Month): 2 (May)
Pages: 197-208

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Handle: RePEc:eee:resene:v:30:y:2008:i:2:p:197-208

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Web page: http://www.elsevier.com/locate/inca/505569

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References

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  1. Golombek, Rolf & Hoel, Michael, 2004. "Climate Agreements and Technology Policy," Memorandum 11/2004, Oslo University, Department of Economics.
  2. Carlo Carraro & Barbara Buchner, 2006. "Economic and Environmental Effectiveness of a Technology-based Climate Protocol," Working Papers 2006_12Classification-JEL, Department of Economics, University of Venice "Ca' Foscari".
  3. Golombek Rolf & Hoel Michael, 2006. "Second-Best Climate Agreements and Technology Policy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-30, January.
  4. Keller, Wolfgang, 2001. "Geographic Localization of International Technology Diffusion," CEPR Discussion Papers 2706, C.E.P.R. Discussion Papers.
  5. Knut Einar Rosendahl, 2002. "Cost-effective environmental policy: Implications of induced technological change," Discussion Papers 314, Research Department of Statistics Norway.
  6. Xepapadeas, A., 1995. "Induced technical change and international agreements under greenhouse warming," Resource and Energy Economics, Elsevier, vol. 17(1), pages 1-23, May.
  7. Carlo Carraro & Carmen Marchiori, 2003. "Endogenous Strategic Issue Linkage in International Negotiations," Working Papers 2003.40, Fondazione Eni Enrico Mattei.
  8. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-21, January.
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Cited by:
  1. Wei Jin, 2012. "International Knowledge Spillover and Technology Externality: Why Multilateral R&D Coordination Matters for Global Climate Governance," CAMA Working Papers 2012-53, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. De Cian, Enrica & Tavoni, Massimo, 2012. "Do technology externalities justify restrictions on emission permit trading?," Resource and Energy Economics, Elsevier, vol. 34(4), pages 624-646.
  3. Hong, Fuhai & Karp, Larry, 2012. "International environmental agreements with mixed strategies and investment," CUDARE Working Paper Series 1129, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  4. Ziesemer, Thomas & Michaelis, Peter, 2011. "Strategic environmental policy and the accumulation of knowledge," Structural Change and Economic Dynamics, Elsevier, vol. 22(2), pages 180-191, June.
  5. Lessmann, Kai & Edenhofer, Ottmar, 2011. "Research cooperation and international standards in a model of coalition stability," Resource and Energy Economics, Elsevier, vol. 33(1), pages 36-54, January.
  6. Fuhai Hong & Susheng Wang, 2012. "Climate Policy, Learning, and Technology Adoption in Small Countries," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 51(3), pages 391-411, March.

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