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Climate Agreements and Technology Policy

  • Michael Hoel

    (Department of Economics, University of Oslo)

  • Rolf Golombek

    (Frisch Centre)

We study climate policy when there are technology spillovers within and across countries, and the technology externalities within each country are corrected through a domestic subsidy of R&D investments. We compare the properties of international climate agreements when the inter-country externalities from R&D are not regulated through the climate agreement. With an international agreement controlling abatements directly through emission quotas, the equilibrium R&D subsidy is lower that the socially optimal subsidy. The equilibrium subsidy is even lower if the climate agreement does not specify emission levels directly, but instead imposes a common carbon tax. Social costs are higher under a tax agreement than under a quota agreement. Moreover, for a reasonable assumption on the abatement cost function, R&D investments and abatement levels are lower under a tax agreement than under a quota agreement. Total emissions may be higher or lower in a second-best optimal quota agreement than in the first-best optimum.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.90.

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Date of creation: May 2004
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Handle: RePEc:fem:femwpa:2004.90
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  1. Loschel, Andreas, 2002. "Technological change in economic models of environmental policy: a survey," Ecological Economics, Elsevier, vol. 43(2-3), pages 105-126, December.
  2. 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 569-96, September.
  3. Rolf Golombek & Michael Hoel, 2003. "Climate Policy under Technology Spillovers," Working Papers 2003.38, Fondazione Eni Enrico Mattei.
  4. Buonanno, Paolo & Carraro, Carlo & Galeotti, Marzio, 2003. "Endogenous induced technical change and the costs of Kyoto," Resource and Energy Economics, Elsevier, vol. 25(1), pages 11-34, February.
  5. Knut Einar Rosendahl, 2002. "Cost-effective environmental policy: Implications of induced technological change," Discussion Papers 314, Research Department of Statistics Norway.
  6. Xepapadeas, A., 1995. "Induced technical change and international agreements under greenhouse warming," Resource and Energy Economics, Elsevier, vol. 17(1), pages 1-23, May.
  7. Slim Ben Youssef, 2009. "Transboundary pollution, R&D spillovers and international trade," The Annals of Regional Science, Springer, vol. 43(1), pages 235-250, March.
  8. Rasmussen, Tobias N., 2001. "CO2 abatement policy with learning-by-doing in renewable energy," Resource and Energy Economics, Elsevier, vol. 23(4), pages 297-325, October.
  9. 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.
  10. Carlo Carraro & Carmen Marchiori, 2003. "Endogenous Strategic Issue Linkage in International Negotiations," Working Papers 2003.40, Fondazione Eni Enrico Mattei.
  11. Adam Jaffe & Richard Newell & Robert Stavins, 2002. "Environmental Policy and Technological Change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(1), pages 41-70, June.
  12. Michael Hoel, 1993. "Harmonization of carbon taxes in international climate agreements," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 3(3), pages 221-231, June.
  13. Hoel, Michael, 1992. "Carbon taxes : An international tax or harmonized domestic taxes?," European Economic Review, Elsevier, vol. 36(2-3), pages 400-406, April.
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