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Strategic Investment in Climate Friendly Technologies: The Impact of Global Emissions Trading

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Listed author(s):
  • Mads Greaker

    ()

  • Cathrine Hagem

Abstract

Our point of departure is that a group of industrialized countries invest in research and development (R&D) of greenhouse gas (GHG) abatement technologies. R&D investments influence the future GHG abatement choices of both industrialized and developing countries. We distinguish between investments that reduce industrialized countries’ abatement costs and investments that reduce developing countries’ abatement costs. Unlike earlier contributions, we include global trading in emission permits. This changes the nature of the game. With global permit trading, industrialized countries should in many cases invest strategically in technologies that only reduce abatement costs at home. This comes in addition to investments abroad. Second, we show that R&D investments always decrease total emissions. Finally, we find that the developing region receiving investments always benefits. Copyright Springer Science+Business Media Dordrecht 2014

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File URL: http://hdl.handle.net/10.1007/s10640-013-9718-z
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Article provided by Springer & European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 59 (2014)
Issue (Month): 1 (September)
Pages: 65-85

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Handle: RePEc:kap:enreec:v:59:y:2014:i:1:p:65-85
DOI: 10.1007/s10640-013-9718-z
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Keywords: Greenhouse gas abatement technologies; Climate policy ; Strategic investments; Permit trade; D62; H41; O38; Q58;

Find related papers by JEL classification:

  • D62 - Microeconomics - - Welfare Economics - - - Externalities
  • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
  • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
  • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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  1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  2. Gersbach, Hans & Winkler, Ralph, 2011. "International emission permit markets with refunding," European Economic Review, Elsevier, vol. 55(6), pages 759-773, August.
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  4. Wolfgang Buchholz & Kai Konrad, 1994. "Global environmental problems and the strategic choice of technology," Journal of Economics, Springer, vol. 60(3), pages 299-321, October.
  5. Carbone, Jared C. & Helm, Carsten & Rutherford, Thomas F., 2009. "The case for international emission trade in the absence of cooperative climate policy," Journal of Environmental Economics and Management, Elsevier, vol. 58(3), pages 266-280, November.
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  7. Hoel, Michael, 1991. "Global environmental problems: The effects of unilateral actions taken by one country," Journal of Environmental Economics and Management, Elsevier, vol. 20(1), pages 55-70, January.
  8. Pizer, William A., 2002. "Combining price and quantity controls to mitigate global climate change," Journal of Public Economics, Elsevier, vol. 85(3), pages 409-434, September.
  9. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
  10. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
  11. Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Journal of Public Economics, Elsevier, vol. 87(12), pages 2737-2747, December.
  12. Yoram Bauman & Myunghun Lee & Karl Seeley, 2008. "Does Technological Innovation Really Reduce Marginal Abatement Costs? Some Theory, Algebraic Evidence, and Policy Implications," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(4), pages 507-527, August.
  13. Baker, Erin & Clarke, Leon & Shittu, Ekundayo, 2008. "Technical change and the marginal cost of abatement," Energy Economics, Elsevier, vol. 30(6), pages 2799-2816, November.
  14. John K. Stranlund, 1999. "Sunk Capital and Negotiated Resolutions of Environmental Conflicts," Land Economics, University of Wisconsin Press, vol. 75(1), pages 142-155.
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Cited by:

  1. Nachtigall, Daniel, 2016. "Linking Emissions Trading Schemes in the Presence of Research and Develoment Spillovers," Annual Conference 2016 (Augsburg): Demographic Change 145721, Verein für Socialpolitik / German Economic Association.
  2. Imai, Kenichi, 2015. "Assessing the Effects of Kyoto Mechanisms on the Diffusion of Climate Change Mitigation Technologies," AGI Working Paper Series 2015-15, Asian Growth Research Institute.

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