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Spill or leak? Carbon leakage with international technology spillovers: A CGE analysis

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  • Gerlagh, Reyer
  • Kuik, Onno

Abstract

This paper studies the effect of endogenous technical change and international technology spillovers on carbon leakage. It is well known that a unilateral CO2 abatement policy in one region may cause CO2 emissions to increase in non-abating regions because of the relocation of CO2-intensive firms and because of energy market effects. If, however, the CO2 mitigation policy induces energy-saving technological innovation in the home region and this innovation can freely spill-over to energy users abroad, carbon leakage may be offset by induced efficiency gains in foreign firms. In this paper we develop a simple mathematical model of carbon leakage and technological spillovers and perform numerical simulations with an adjusted CGE model to illustrate the potential importance of international technology spillovers. We show that carbon leakage can become negative at moderate levels of technology spillover.

Suggested Citation

  • Gerlagh, Reyer & Kuik, Onno, 2014. "Spill or leak? Carbon leakage with international technology spillovers: A CGE analysis," Energy Economics, Elsevier, vol. 45(C), pages 381-388.
    • Handle: RePEc:eee:eneeco:v:45:y:2014:i:c:p:381-388
    DOI: 10.1016/j.eneco.2014.07.017
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    Keywords

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    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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