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Endogenous technology and tradable emission quotas

  • Golombek, Rolf
  • Hoel, Michael

We study an international climate agreement that assigns emission quotas to each participating country. Unlike the simplest models in the literature, we assume that abatement costs are affected by R&D activities undertaken in all firms in all countries, i.e. abatement technologies are endogenous. In line with the Kyoto agreement we assume that the international climate agreement does not include R&D policies. We show that for a second-best agreement with heterogeneous countries, marginal costs of abatement differ across countries. In other words, the second-best outcome cannot be achieved if emission quotas are tradable.

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Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 30 (2008)
Issue (Month): 2 (May)
Pages: 197-208

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Handle: RePEc:eee:resene:v:30:y:2008:i:2:p:197-208
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505569

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  1. Barbara Buchner & Carlo Carraro, 2004. "Economic and environmental effectiveness of a technology-based climate protocol," Climate Policy, Taylor & Francis Journals, vol. 4(3), pages 229-248, September.
  2. Keller, Wolfgang, 2001. "Geographic Localization of International Technology Diffusion," CEPR Discussion Papers 2706, C.E.P.R. Discussion Papers.
  3. Michael Hoel & Rolf Golombek, 2004. "Climate Agreements and Technology Policy," Working Papers 2004.90, Fondazione Eni Enrico Mattei.
  4. Golombek Rolf & Hoel Michael, 2006. "Second-Best Climate Agreements and Technology Policy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-30, January.
  5. Carlo Carraro & Carmen Marchiori, 2003. "Endogenous Strategic Issue Linkage in International Negotiations," Working Papers 2003.40, Fondazione Eni Enrico Mattei.
  6. Knut Einar Rosendahl, 2002. "Cost-effective environmental policy: Implications of induced technological change," Discussion Papers 314, Research Department of Statistics Norway.
  7. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-21, January.
  8. Xepapadeas, A., 1995. "Induced technical change and international agreements under greenhouse warming," Resource and Energy Economics, Elsevier, vol. 17(1), pages 1-23, May.
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