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Endogenous technology and tradable emission quotas

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Forfattere:

Golombek, Rolf and Michael Hoel

År:

2006

Referanse:

Memorandum
Nummer i serie: 3

Summary

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 secondbest 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.

Nøkkelord:

Climate policy, international climate agreements, emission quotas, technology spillovers.

JEL:

H23; O30; Q20; Q25; Q28;

Prosjekt info:

Oppdragsgiver: Norges forskningsråd
Oppdragsgivers prosjektnr.:
Frisch prosjekt: 3144 - Post Kyoto Climate Agreements and Technological Innovation