North-South diffusion of climate-mitigation technologies: the crowding-out effect on relocation

Julie Ing () and Jean-Philippe Nicolaï ()
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Julie Ing: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique
Jean-Philippe Nicolaï: ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich], EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: The deployment of cleaner production technologies is supposed to be crucial to mitigate the effect of climate change. The diffusion of technology from developed to developing countries can be done through different channels. It can be a business decision such as firms' relocation, opening of a subsidiary or the adoption of technology by southern firms, or it may be decided at the government level. This paper investigates, in a two-country model (North and South), the relationship between the diffusion of mitigation technologies, firms' relocation and the environment. We assume that both countries implement a carbon tax and there are two kinds of production technology used: a relatively clean technology and a dirty one. This paper theoretically shows that the technology diffusion by technology adoption, public transfer or subsidiary creation induces a decrease in relocation, while technology diffusion via purchasing dirty southern firms may increase the number of relocated firms. The paper also demonstrates that technology diffusion may have perverse effects in the long run. Indeed, total emissions may increase with technology diffusion since southern firms become more competitive.

Keywords: technology diffusion; carbon tax; relocation; trade of polluting goods; imperfect competition; subsidiary; public transfer (search for similar items in EconPapers)
Date: 2020-02
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Published in Environment and Development Economics, 2020, 25 (1), pp.21-43. ⟨10.1017/S1355770X19000445⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-02465253

DOI: 10.1017/S1355770X19000445

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