Permit Markets, Carbon Prices and the Creation of Innovation Clusters

Hans Gersbach and Marie-Catherine Riekhof

No 18/303, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: Innovation clusters combining public and private effort to develop breakthrough technologies promise greater technological advances to slow down climate change. We use a multi-country model with emissions permit trade to examine how international climate policy can incentivize countries to create such clusters. We find that a minimal carbon price is needed to attract applied research firms, but countries may nevertheless fail to invest in complementary research infrastructure. We construct a mechanism that leads to innovation clusters. It is a combination of low permit endowments for the country with the lowest costs to build the needed infrastructure, compensation for this country by profits from permit trade, and maximal possible permit endowments for the remaining countries.

Keywords: International permit markets; Carbon prices; Innovation clusters; Research infrastructure; Applied R&D; Climate change mitigation; Externalities (search for similar items in EconPapers)
JEL-codes: H23 O32 Q54 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2018-11
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-reg
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Permit markets, carbon prices and the creation of innovation clusters (2021)
Working Paper: Permit Markets, Carbon Prices and the Creation of Innovation Clusters (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eth:wpswif:18-303

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