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Strategic Investment in Climate Friendly Technologies: The Impact of Global Emissions Trading

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  • Mads Greaker
  • Cathrine Hagem

Abstract

Our point of departure is that a group of industrialized countries invest in research and development (R&D) of greenhouse gas (GHG) abatement technologies. R&D investments influence the future GHG abatement choices of both industrialized and developing countries. We distinguish between investments that reduce industrialized countries’ abatement costs and investments that reduce developing countries’ abatement costs. Unlike earlier contributions, we include global trading in emission permits. This changes the nature of the game. With global permit trading, industrialized countries should in many cases invest strategically in technologies that only reduce abatement costs at home. This comes in addition to investments abroad. Second, we show that R&D investments always decrease total emissions. Finally, we find that the developing region receiving investments always benefits. Copyright Springer Science+Business Media Dordrecht 2014

Suggested Citation

  • Mads Greaker & Cathrine Hagem, 2014. "Strategic Investment in Climate Friendly Technologies: The Impact of Global Emissions Trading," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(1), pages 65-85, September.
    • Handle: RePEc:kap:enreec:v:59:y:2014:i:1:p:65-85
    DOI: 10.1007/s10640-013-9718-z
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    Cited by:

    1. Zhenyu Zhang & Xumin Ren, 2023. "Multidimensional Legal Research on the Transfer of Environmentally Sound Technologies in China," Sustainability, MDPI, vol. 15(3), pages 1-21, January.
    2. Gersbach, Hans & Riekhof, Marie-Catherine, 2021. "Permit markets, carbon prices and the creation of innovation clusters," Resource and Energy Economics, Elsevier, vol. 65(C).
    3. Carsten Helm & Stefan Pichler, 2015. "Climate Policy with Technology Transfers and Permit Trading," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(1), pages 37-54, January.
    4. Imai, Kenichi, 2015. "Assessing the Effects of Kyoto Mechanisms on the Diffusion of Climate Change Mitigation Technologies," AGI Working Paper Series 2015-15, Asian Growth Research Institute.
    5. Florian Böser & Chiara Colesanti Senni, 2020. "Emission-based Interest Rates and the Transition to a Low-carbon Economy," CER-ETH Economics working paper series 20/337, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    6. Ma, Shigui & He, Yong & Gu, Ran & Li, Shanshan, 2021. "Sustainable supply chain management considering technology investments and government intervention," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 149(C).
    7. Cheng, Haitao, 2024. "Domestic versus international emissions trading with capital mobility," Resource and Energy Economics, Elsevier, vol. 77(C).
    8. Nachtigall, Daniel, 2016. "Linking Emissions Trading Schemes in the Presence of Research and Develoment Spillovers," VfS Annual Conference 2016 (Augsburg): Demographic Change 145721, Verein für Socialpolitik / German Economic Association.
    9. Florian B¨oser & Chiara Colesanti Senni, 2021. "CAROs: Climate Risk-Adjusted Refinancing Operations," CER-ETH Economics working paper series 21/354, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

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    More about this item

    Keywords

    Greenhouse gas abatement technologies; Climate policy ; Strategic investments; Permit trade; D62; H41; O38; Q58;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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