Spill or leak? Carbon leakage with international technology spillovers: A CGE analysis

Reyer Gerlagh and Onno Kuik

Energy Economics, 2014, vol. 45, issue C, 381-388

Abstract: This paper studies the effect of endogenous technical change and international technology spillovers on carbon leakage. It is well known that a unilateral CO2 abatement policy in one region may cause CO2 emissions to increase in non-abating regions because of the relocation of CO2-intensive firms and because of energy market effects. If, however, the CO2 mitigation policy induces energy-saving technological innovation in the home region and this innovation can freely spill-over to energy users abroad, carbon leakage may be offset by induced efficiency gains in foreign firms. In this paper we develop a simple mathematical model of carbon leakage and technological spillovers and perform numerical simulations with an adjusted CGE model to illustrate the potential importance of international technology spillovers. We show that carbon leakage can become negative at moderate levels of technology spillover.

Keywords: Carbon leakage; Climate policy; Endogenous technical change; Trade and the environment (search for similar items in EconPapers)
JEL-codes: F18 O39 Q25 Q4 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (63)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:45:y:2014:i:c:p:381-388

DOI: 10.1016/j.eneco.2014.07.017

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