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Endogenous Technology and Tradable Emission Quotas

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  • Golombek, Rolf
  • Hoel, Michael

Abstract

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, marginal costs of abatement should exceed the Pigovian level. Moreover, marginal costs of abatement differ across countries in the second-best quota agreement with heterogeneous countries. In other words, the second-best outcome cannot be achieved if emission quotas are tradable.

Suggested Citation

  • Golombek, Rolf & Hoel, Michael, 2006. "Endogenous Technology and Tradable Emission Quotas," Climate Change Modelling and Policy Working Papers 12042, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemcc:12042
    DOI: 10.22004/ag.econ.12042
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    References listed on IDEAS

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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.
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    5. 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.
    6. 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.
    7. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
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    10. Michael Hoel & Rolf Golombek, 2004. "Climate Agreements and Technology Policy," Working Papers 2004.90, Fondazione Eni Enrico Mattei.
    11. Scott Barrett, 2006. "Climate Treaties and "Breakthrough" Technologies," American Economic Review, American Economic Association, vol. 96(2), pages 22-25, May.
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    Cited by:

    1. Jin, Wei, 2016. "International technology diffusion, multilateral R&D coordination, and global climate mitigation," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 357-372.
    2. De Cian, Enrica & Tavoni, Massimo, 2012. "Do technology externalities justify restrictions on emission permit trading?," Resource and Energy Economics, Elsevier, vol. 34(4), pages 624-646.
    3. Gersbach, Hans & Riekhof, Marie-Catherine, 2021. "Permit markets, carbon prices and the creation of innovation clusters," Resource and Energy Economics, Elsevier, vol. 65(C).
    4. Hong, Fuhai & Karp, Larry, 2012. "International Environmental Agreements with mixed strategies and investment," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 685-697.
    5. Lambertini, Luca & Poyago-Theotoky, Joanna & Tampieri, Alessandro, 2017. "Cournot competition and “green” innovation: An inverted-U relationship," Energy Economics, Elsevier, vol. 68(C), pages 116-123.
    6. Robert Schmidt & Roland Strausz, 2015. "On the Timing of Climate Agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(3), pages 521-547, November.
    7. J. Piet Hausberg & Sabrina Korreck, 2020. "Business incubators and accelerators: a co-citation analysis-based, systematic literature review," The Journal of Technology Transfer, Springer, vol. 45(1), pages 151-176, February.
    8. repec:hum:wpaper:sfb649dp2014-044 is not listed on IDEAS
    9. Michael Hübler, 2015. "A theory-based discussion of international technology funding," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(2), pages 313-327, April.
    10. Eskeland, Gunnar S., 2013. "Leadership in Climate Policy: Is there a case for Early Unilateral Unconditional Emission Reductions?," Discussion Papers 2013/6, Norwegian School of Economics, Department of Business and Management Science.
    11. Nachtigall, Daniel, 2016. "Linking Emissions Trading Schemes in the Presence of Research and Develoment Spillovers," VfS Annual Conference 2016 (Augsburg): Demographic Change 145721, Verein für Socialpolitik / German Economic Association.
    12. Wei Jin, 2012. "International Knowledge Spillover and Technology Externality: Why Multilateral R&D Coordination Matters for Global Climate Governance," CAMA Working Papers 2012-53, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    13. Lessmann, Kai & Edenhofer, Ottmar, 2011. "Research cooperation and international standards in a model of coalition stability," Resource and Energy Economics, Elsevier, vol. 33(1), pages 36-54, January.
    14. Marijn A. Weele & Frank J. Rijnsoever & Menno Groen & Ellen H. M. Moors, 2020. "Gimme shelter? Heterogeneous preferences for tangible and intangible resources when choosing an incubator," The Journal of Technology Transfer, Springer, vol. 45(4), pages 984-1015, August.
    15. Ziesemer, Thomas & Michaelis, Peter, 2011. "Strategic environmental policy and the accumulation of knowledge," Structural Change and Economic Dynamics, Elsevier, vol. 22(2), pages 180-191, June.
    16. Alberto M. Zanni & Abigail L. Bristow & Mark Wardman, 2013. "The potential behavioural effect of personal carbon trading: results from an experimental survey," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 2(2), pages 222-243, July.
    17. Alfred Endres & Bianca Rundshagen, 2013. "Incentives to Diffuse Advanced Abatement Technology Under the Formation of International Environmental Agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(2), pages 177-210, October.
    18. Frank Bodendorf & Barbara Hollweck & Jörg Franke, 2022. "Information Asymmetry in Business-to-Business Negotiations: A Game Theoretical Approach to Support Purchasing Decisions with Suppliers," Group Decision and Negotiation, Springer, vol. 31(4), pages 723-745, August.
    19. Fuhai Hong & Susheng Wang, 2012. "Climate Policy, Learning, and Technology Adoption in Small Countries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(3), pages 391-411, March.

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    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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