Clean development mechanism (CDM) vs. international permit trading – the impact on technological change

Cathrine Hagem

No 19/2006, Memorandum from Oslo University, Department of Economics

Abstract: The clean development mechanism (CDM) under the Kyoto Protocol may induce a technological change in developing countries. As an alternative to the CDM-regime, developing countries may accept a (generous) cap on their own emissions, let domestic producers invest in new efficient technologies, and sell the excess emission permits on the international permit market (cap&trade-regime). The purpose of this paper is to show how the gains from investment, and hence the incentive for investment in new technology may deviate between the two alternative regimes. We show that the difference in gains from investment depends on whether the producers face competitive or non-competitive output markets, whether the investment affects fixed or variable production costs and whether the producers can reduce emissions through other means than investment in new technology

Keywords: Climate Policy; Technology Adoption; Emission Trading; Clean Development Mechanism; Technological Change (search for similar items in EconPapers)
JEL-codes: L13 Q28 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-10-04
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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