Endogenous Technology and Tradable Emission Quotas

Rolf Golombek and Michael Hoel

No 12042, Climate Change Modelling and Policy Working Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: 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 second-best 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.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 17
Date: 2006
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https://ageconsearch.umn.edu/record/12042/files/wp060042.pdf (application/pdf)

Related works:
Journal Article: Endogenous technology and tradable emission quotas (2008)
Working Paper: Endogenous Technology and Tradable Emission Quotas (2006)
Working Paper: Endogenous technology and tradable emission quotas (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemcc:12042

DOI: 10.22004/ag.econ.12042

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