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Carbon Leakage with International Technology Spillovers

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  • Gerlagh, Reyer
  • Kuik, Onno

Abstract

In this paper we study the effect of international technology spillovers on carbon leakage. We first develop and analyse two simple competing models for carbon leakage. The first model represents the pollution haven hypothesis. It focuses on the international competition between firms that produce energy-intensive goods. The second model highlights the role of a globally integrated carbon-energy market. We calculate formulas for the leakage rates in both models and, through meta-analysis, show that the second model captures best the major mechanisms reported in the CGE literature on carbon leakage. We extend this model with endogenous energy-saving technology and international technology spillovers. This feature is shown to decrease carbon leakage. We build-in the endogenous energy-saving technology in a large CGE model and verify that the results from the formal model carry over. Carbon leakage becomes negative for moderate levels of international technology spillover.

Suggested Citation

  • Gerlagh, Reyer & Kuik, Onno, 2007. "Carbon Leakage with International Technology Spillovers," Climate Change Modelling and Policy Working Papers 9328, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemcc:9328
    DOI: 10.22004/ag.econ.9328
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    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • O39 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Other
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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