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Climate cooperation with technology investments and border carbon adjustment

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  • Helm, Carsten
  • Schmidt, Robert C.

Abstract

A central question in climate policy is whether early investments in low-carbon technologies are a useful first step towards a more effective climate agreement in the future. We introduce a climate cooperation model with endogenous R&D investments where countries protect their international competitiveness via border carbon adjustments (BCA). BCA raises the scope for cooperation and leads to a non-trivial relation between countries׳ prior R&D investments and participation in the coalition. We find that early investments in R&D render free-riding more attractive. Therefore, with delayed cooperation on emission abatement and ex-ante R&D investments, the outcome is often characterized by high participation but inefficiently low technology investments and abatement.

Suggested Citation

  • Helm, Carsten & Schmidt, Robert C., 2015. "Climate cooperation with technology investments and border carbon adjustment," European Economic Review, Elsevier, vol. 75(C), pages 112-130.
  • Handle: RePEc:eee:eecrev:v:75:y:2015:i:c:p:112-130
    DOI: 10.1016/j.euroecorev.2015.01.007
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    Citations

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    Cited by:

    1. Böhringer, Christoph & Rosendahl, Knut Einar & Briseid Storrøsten, Halvor, 2015. "Smart hedging against carbon leakage," Working Paper Series 14-2015, Norwegian University of Life Sciences, School of Economics and Business.
    2. repec:eee:pubeco:v:149:y:2017:i:c:p:35-46 is not listed on IDEAS
    3. Marco Battaglini & Bård Harstad, 2016. "Participation and Duration of Environmental Agreements," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 160-204.
    4. Christoph Böhringer & Knut Einar Rosendahl & Halvor Briseid Storrøsten, 2015. "Mitigating Carbon Leakage: Combining Output-Based Rebating with a Consumption Tax," CESifo Working Paper Series 5459, CESifo Group Munich.
    5. Richter, Philipp M. & Runkel, Marco & Schmidt, Robert C., 2019. "Strategic environmental policy and the mobility of firms," KCG Working Papers 14, Kiel Centre for Globalization (KCG).
    6. Santiago J. Rubio, 2018. "Self-Enforcing International Environmental Agreements: Adaptation and Complementarity," Working Papers 2018.29, Fondazione Eni Enrico Mattei.
    7. Miguel A. Meléndez-Jiménez & Arnold Polanski, 2018. "Dirty neighbors: Pollution in an interlinked world," Working Papers 2018-06, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.
    8. repec:eee:eecrev:v:101:y:2018:i:c:p:418-440 is not listed on IDEAS
    9. Christoph Böhringer & Knut Einar Rosendahl & Halvor Briseid Storrøsten, 2015. "Mitigating carbon leakage: Combining output-based rebating with a consumption tax," ZenTra Working Papers in Transnational Studies 54 / 2015, ZenTra - Center for Transnational Studies.
    10. Pichler, Paul & Sorger, Gerhard, 2018. "Delegating climate policy to a supranational authority: a theoretical assessment," European Economic Review, Elsevier, vol. 101(C), pages 418-440.

    More about this item

    Keywords

    Climate treaty; Border carbon adjustment; Border tax adjustment; Coalitions; R&D;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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