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Technology Diffusion, Abatement Cost, and Transboundary Pollution

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  • Geoffrey Heal

    (Columbia University)

  • Nori Tarui

    (University of Hawaii at Manoa)

Abstract

This paper studies countries’ incentives to develop advanced pollution abatement technology when technology may spillover across countries and pollution abatement is a global public good. We are motivated in part by the problem of global warming: a solution to this involves providing a global public good, and will surely require the development and implementation of new technologies. We show that at the Nash equilibrium of a simultaneous-move game with R&D investment and emission abatement, whether the free rider effect prevails and under-investment and excess emissions occur depends on the degree of technology spillovers and the effect of R&D on the marginal abatement costs. There are cases in which, contrary to conventional wisdom, Nash equilibrium investments in emissions reductions exceed the first-best case.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2008.96.

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Date of creation: Nov 2008
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Handle: RePEc:fem:femwpa:2008.96

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Keywords: International Environmental Agreement; Pollution Abatement Costs; Endogenous Technological Change;

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References

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  1. Kolstad, Charles D., 2007. "Systematic uncertainty in self-enforcing international environmental agreements," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 68-79, January.
  2. Moledina, Amyaz A. & Coggins, Jay S. & Polasky, Stephen & Costello, Christopher, 2003. "Dynamic environmental policy with strategic firms: prices versus quantities," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 356-376, March.
  3. Stavins, Robert N., 2004. "Environmental Economics," Working paper 276, Regulation2point0.
  4. Malik, Arun S., 1991. "Permanent versus interim regulations: A game-theoretic analysis," Journal of Environmental Economics and Management, Elsevier, vol. 21(2), pages 127-139, September.
  5. Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
  6. Stavins, Robert & Jaffe, Adam & Newell, Richard, 2000. "Technological Change and the Environment," Discussion Papers dp-00-47, Resources For the Future.
  7. Bréchet, Thierry & Jouvet, Pierre-André, 2008. "Environmental innovation and the cost of pollution abatement revisited," Ecological Economics, Elsevier, vol. 65(2), pages 262-265, April.
  8. Golombek, Rolf & Hoel, Michael, 2005. "The Kyoto agreement and Technology Spillovers," Memorandum 05/2005, Oslo University, Department of Economics.
  9. Barbara Buchner & Carlo Carraro & Igor Cersosimo & Carmen Marchiori, 2002. "Back to Kyoto? US Participation and the Linkage between R&D and Climate Cooperation," CESifo Working Paper Series 688, CESifo Group Munich.
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Cited by:
  1. Malika Hamadi & Guillermo Baquero, 2011. "Competition, Loan Rates and Information Dispersion in Microcredit Markets," CREA Discussion Paper Series 11-17, Center for Research in Economic Analysis, University of Luxembourg.

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