IDEAS home Printed from https://ideas.repec.org/p/ssb/dispap/615.html
   My bibliography  Save this paper

Strategic investment in climate friendly technologies: the impact of permit trade

Author

Listed:

Abstract

Our point of departure is that a group of developed countries invest in the development of greenhouse gas (GHG) abatement technologies both at home and in developing countries. Such investments reduce the cost of future GHG abatement, and influence the future GHG abatement choices of both developed and developing countries. We show how a common permit market affects the industrialized countries' strategic investment decisions. As opposed to a situation without a permit market, the industrialized countries may want to overinvest in new GHG abatement technologies both at home and abroad. That is, they increase their R&D investment to such an extent that the cost reductions from the least profitable project actually fall short of the R&D costs. Earlier research has only pointed to overinvestment abroad. Moreover, the effects of investment abroad may be tougher emission reduction targets at home, which is not possible without permit trade.

Suggested Citation

  • Mads Greaker & Cathrine Hagem, 2010. "Strategic investment in climate friendly technologies: the impact of permit trade," Discussion Papers 615, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:615
    as

    Download full text from publisher

    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp615.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John Stranlund, 1996. "On the strategic potential of technological aid in international environmental relations," Journal of Economics, Springer, vol. 64(1), pages 1-22, February.
    2. Wolfgang Buchholz & Kai Konrad, 1994. "Global environmental problems and the strategic choice of technology," Journal of Economics, Springer, vol. 60(3), pages 299-321, October.
    3. Bjart J. Holtsmark & Dag Einar Sommervoll, 2008. "International emissions trading in a non-cooperative equilibrium," Discussion Papers 542, Statistics Norway, Research Department.
    4. Carbone, Jared C. & Helm, Carsten & Rutherford, Thomas F., 2009. "The case for international emission trade in the absence of cooperative climate policy," Journal of Environmental Economics and Management, Elsevier, vol. 58(3), pages 266-280, November.
    5. Parkash Chander & Henry Tulkens, 2006. "A Core-Theoretic Solution for the Design of Cooperative Agreements on Transfrontier Pollution," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 176-193, Springer.
    6. Hoel, Michael, 1991. "Global environmental problems: The effects of unilateral actions taken by one country," Journal of Environmental Economics and Management, Elsevier, vol. 20(1), pages 55-70, January.
    7. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    8. Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Journal of Public Economics, Elsevier, vol. 87(12), pages 2737-2747, December.
    9. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
    10. John K. Stranlund, 1999. "Sunk Capital and Negotiated Resolutions of Environmental Conflicts," Land Economics, University of Wisconsin Press, vol. 75(1), pages 142-155.
    11. Scott Barrett, 1999. "A Theory of Full International Cooperation," Journal of Theoretical Politics, , vol. 11(4), pages 519-541, October.
    12. Golombek Rolf & Hoel Michael, 2004. "Unilateral Emission Reductions and Cross-Country Technology Spillovers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(2), pages 1-27, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:zbw:hohpro:341 is not listed on IDEAS
    2. 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.
    3. repec:old:wpaper:341 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Holtsmark, Katinka & Midttømme, Kristoffer, 2021. "The dynamics of linking permit markets," Journal of Public Economics, Elsevier, vol. 198(C).
    3. 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.
    4. 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.
    5. Eyckmans, Johan & Kverndokk, Snorre, 2010. "Moral concerns on tradable pollution permits in international environmental agreements," Ecological Economics, Elsevier, vol. 69(9), pages 1814-1823, July.
    6. repec:zbw:hohpro:341 is not listed on IDEAS
    7. Bjart Holtsmark, 2013. "International cooperation on climate change: why is there so little progress?," Chapters, in: Roger Fouquet (ed.), Handbook on Energy and Climate Change, chapter 13, pages 327-343, Edward Elgar Publishing.
    8. repec:old:wpaper:341 is not listed on IDEAS
    9. Birgit Bednar-Friedl, 2012. "Climate policy targets in emerging and industrialized economies: the influence of technological differences, environmental preferences and propensity to save," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 39(2), pages 191-215, May.
    10. Habla, Wolfgang & Winkler, Ralph, 2018. "Strategic delegation and international permit markets: Why linking May fail," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 244-250.
    11. Kai A. Konrad & Marcel Thum, 2018. "Does a Clean Development Mechanism Facilitate International Environmental Agreements?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(4), pages 837-851, April.
    12. Fischer, Carolyn & Greaker, Mads & Rosendahl, Knut Einar, 2018. "Strategic technology policy as a supplement to renewable energy standards," Resource and Energy Economics, Elsevier, vol. 51(C), pages 84-98.
    13. Buchholz Wolfgang & Heindl Peter, 2015. "Ökonomische Herausforderungen des Klimawandels," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 16(4), pages 324-350, December.
    14. Tetsuo Ono & Yasuo Maeda, 2002. "On the index of environmental awareness," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 5(2), pages 167-178, June.
    15. Snorre Kverndokk, 2013. "Moral positions on tradable permit markets," Chapters, in: Roger Fouquet (ed.), Handbook on Energy and Climate Change, chapter 22, pages 490-499, Edward Elgar Publishing.
    16. Fabio Sferra & Massimo Tavoni, 2013. "Endogenous Participation in a Partial Climate Agreement with Open Entry: A Numerical Assessment," Working Papers 2013.60, Fondazione Eni Enrico Mattei.
    17. Kai Lessmann & Robert Marschinski & Michael Finus & Ulrike Kornek & Ottmar Edenhofer, 2014. "Emissions Trading with Non-signatories in a Climate Agreement—an Analysis of Coalition Stability," Manchester School, University of Manchester, vol. 82, pages 82-109, December.
    18. Baran Doda & Simon Quemin & Luca Taschini, 2017. "A Theory of Gains from Trade in Multilaterally Linked ETSs," Working Papers 1706, Chaire Economie du climat.
    19. Matthieu Glachant & Julie Ing & Jean Philippe Nicolai, 2017. "The Incentives for North-South Transfer of Climate-Mitigation Technologies with Trade in Polluting Goods," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 435-456, March.
    20. Habla, Wolfgang & Winkler, Ralph, 2015. "Strategic Delegation and Non-cooperative International Permit Markets," Working Papers in Economics 636, University of Gothenburg, Department of Economics.
    21. Wolfgang Buchholz & Michael Eichenseer, 2019. "Advantageous leadership in public good provision: the case of an endogenous contribution technology," Journal of Economics, Springer, vol. 126(1), pages 1-17, January.
    22. Schmidt, Robert C. & Marschinski, Robert, 2010. "Can China benefit from adopting a binding emissions target?," Energy Policy, Elsevier, vol. 38(7), pages 3763-3770, July.

    More about this item

    Keywords

    greenhouse gas abatement technologies; climate policy; strategic investments; permit trade.;
    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:615. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: L Maasø (email available below). General contact details of provider: https://edirc.repec.org/data/ssbgvno.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.