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Climate Policy under Technology Spillovers

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  • Rolf Golombek

    ()

  • Michael Hoel

    ()

Abstract

We study climate policy when there are technology spillovers between countries, as there is no instrument that (directly) corrects for these externalities. Without an international climate agreement, the (non-cooperative) equilibrium depends on whether countries use tradable quotas or carbon taxes as their environmental policy instruments. All countries are better-off in the tax case than in the quota case. Two types of international climate agreements are then studied: One is a Kyoto type of agreement where each country is assigned a specific number of internationally tradable quotas. In the second type of agreement, a common carbon tax is used domestically in all countries. None of the cases satisfy the conditions for the social optimum. Even if the quota price is equal to the Pigovian level, R&D investments will be lower than what is socially optimal in the quota case. It is also argued that the quota agreement gives higher R&D expenditures and more abatement than the tax agreement. Copyright Springer 2005

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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

Volume (Year): 31 (2005)
Issue (Month): 2 (06)
Pages: 201-227

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Handle: RePEc:kap:enreec:v:31:y:2005:i:2:p:201-227

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: climate policy; international environmental agreements; R&D; technology spillovers; O30; H23; Q20; Q28; Q48;

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  1. Wolfgang Keller, 2002. "Geographic Localization of International Technology Diffusion," American Economic Review, American Economic Association, vol. 92(1), pages 120-142, March.
  2. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  3. Adam Jaffe & Richard Newell & Robert Stavins, 2002. "Environmental Policy and Technological Change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(1), pages 41-70, June.
  4. Golombek, Rolf & Hoel, Michael, 2003. "Climate Policy under Technology Spillovers," Memorandum 22/2003, Oslo University, Department of Economics.
  5. Michael Hoel, 1993. "Harmonization of carbon taxes in international climate agreements," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 3(3), pages 221-231, June.
  6. Hoel, Michael, 1992. "Carbon taxes : An international tax or harmonized domestic taxes?," European Economic Review, Elsevier, vol. 36(2-3), pages 400-406, April.
  7. Paolo Buonanno & Carlo Carraro & Efrem Castelnuovo & Marzio Galeotti, 2001. "Emission Trading Restrictions with Endogenous Technological Change," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 1(3), pages 379-395, July.
  8. Löschel, Andreas, 2001. "Technological change in economic models of environmental policy: a survey," ZEW Discussion Papers 01-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Buonanno, Paolo & Carraro, Carlo & Galeotti, Marzio, 2003. "Endogenous induced technical change and the costs of Kyoto," Resource and Energy Economics, Elsevier, vol. 25(1), pages 11-34, February.
  10. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
  11. Rosendahl, Knut Einar, 2004. "Cost-effective environmental policy: implications of induced technological change," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1099-1121, November.
  12. Rasmussen, Tobias N., 2001. "CO2 abatement policy with learning-by-doing in renewable energy," Resource and Energy Economics, Elsevier, vol. 23(4), pages 297-325, October.
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