Endogenous Technology and Tradable Emission Quotas

Michael Hoel () and Rolf Golombek

No 2006.42, Working Papers from Fondazione Eni Enrico Mattei

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: Climate Policy; International Climate Agreements; Emission Quotas; Technology Spillovers (search for similar items in EconPapers)
JEL-codes: H23 O30 Q20 Q25 Q28 (search for similar items in EconPapers)
Date: 2006-03
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-pbe
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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:fem:femwpa:2006.42

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