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Green Technology Transfers and Border Tax Adjustments

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  • Alain-Désiré Nimubona
  • Horatiu Rus

Abstract

We develop a two-country general equilibrium model of foreign technology transfers tied to environmental clean-up and border tax adjustments in the presence of transboundary pollution. Pollution is generated in the aid recipient as a by-product in the production of a ‘dirty’ good, which it consumes, as well as exports to the donor country. In contrast to the literature which typically treats aid as a monetary transfer, we assume that foreign aid consists of a transfer of environmental technology that lowers the cost of public clean-up. We also consider a border tax adjustment (BTA) as a secondary policy instrument used in order to internalize the residual transboundary externality. We study the environmental and welfare outcomes of the technology transfer and the BTA as well as the interaction between the two policy instruments. We derive conditions under which the additional presence of a BTA may lead to a lower transfer and less public pollution abatement in the recipient, with counter-productive consequences for both the environment and welfare. Contrary to intuition, we find that the green technology transfer and the border tax adjustment are not always complements. Copyright Springer Science+Business Media Dordrecht 2015

Suggested Citation

  • Alain-Désiré Nimubona & Horatiu Rus, 2015. "Green Technology Transfers and Border Tax Adjustments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(1), pages 189-206, September.
  • Handle: RePEc:kap:enreec:v:62:y:2015:i:1:p:189-206
    DOI: 10.1007/s10640-014-9821-9
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    Cited by:

    1. Nikos Tsakiris & Panos Hatzipanayotou & Michael S. Michael, 2019. "Border tax adjustments and tariff‐tax reforms with consumption pollution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(6), pages 1107-1125, December.
    2. Banerjee, Suvajit, 2021. "Conjugation of border and domestic carbon adjustment and implications under production and consumption-based accounting of India's National Emission Inventory: A recursive dynamic CGE analysis," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 68-86.

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    More about this item

    Keywords

    Green aid; Technology transfer; Border tax adjustments; Abatement; Transboundary pollution; Environment; International trade; F18; F35; O13; Q28;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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