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Climate cooperation with technology investments and border carbon adjustment

Author

Listed:
  • Carsten Helm
  • C. Schmidt

    (Humboldt University, Berlin)

Abstract

A central question in climate policy is whether early investments in low-carbon technologies are a useful first step towards a more effective climate agreement in the future. We introduce a climate cooperation model with endogenous R&D investments where countries protect their international competitiveness via border carbon adjustments (BCA). BCA raises the scope for cooperation and leads to a non-trivial relation between countries' prior R&D investments and participation in the coalition. We find that early investments in R&D render free-riding more attractive. Therefore, with delayed cooperation on emission abatement and ex-ante R&D investments, the outcome is often characterized by high participation but inefficiently low technology investments and abatement.

Suggested Citation

  • Carsten Helm & C. Schmidt, 2014. "Climate cooperation with technology investments and border carbon adjustment," Working Papers V-371-14, University of Oldenburg, Department of Economics, revised Nov 2014.
    • Handle: RePEc:old:dpaper:371
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    References listed on IDEAS

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    More about this item

    Keywords

    climate treaty; border carbon adjustment; border tax adjustment; coalitions; R&D;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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