Authors: Valentina Bosetti and Elena Verdolini

Notwithstanding the central role attributed to technology transfer (TT) and the effort to promote it through the creation of permanent international bodies such as the Subsidiary Body for Scientific and Technological Advice of the UNFCCC, very little is known about the determinants of this process with respect to energy technologies. This paper marries the literature on international trade with that on innovation and TT in carbon efficient technologies, making a number of important contributions. First, a model of monopolistic competition shows how the decision to export a blueprint/technology depends on market and institutional characteristics of the receiving country, on the distance between the sending and the receiving countries, on the quality of the innovator’s ideas and on variable and fixed costs of production. Asymmetry of TT is the result of differences in innovation levels and ideas productivity. Second, we empirically test our model using carefully selected patent data for both developed and developing countries. As predicted by the model, geographical distance hinders patenting. Conversely, lower financial risks in the receiving country is associated with higher levels of patent duplication. The effects of financial stability differs however with the level of development of the receiving country.