FEEM working papers "Note di lavoro" series
2004 .090

Climate Agreements and Technology Policy


Authors: Michael Hoel, Rolf Golombek
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Climate policy,International environmental agreements,R&D Policy,Technology spillovers
JEL n.: O30,H23,Q20,Q28,Q48
JEL: The B.E. Journals in Economic Analysis & Policy
Pages: 6.1
Date: 2006

Abstract

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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