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Can International Climate Cooperation Induce Knowledge Spillover to Developing Countries? Evidence from CDM

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Abstract

Under the Kyoto Protocol, the Clean Development Mechanism (CDM) expects to facilitate the North-South knowledge spillovers for climate-friendly technologies. This paper examines the effect of this voluntary international climate cooperation on firm innovation and knowledge spillovers through the lens of CDM projects in China. Using a matched Difference-in-Differences (DID) approach, we find that CDM projects contribute to firms’ innovation quantity, quality, and direction in renewable energy and energy efficiency technologies. These effects are more pronounced in inducing wind, hydro, and solar energy. We explore the role of foreign sponsors in knowledge spillovers. Sponsoring firms play the technology supplier role by raising the innovation quantity and quality, while sponsoring governments perform the information intermediary role by facilitating citation flows.

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Notes

  1. Each CER credit, equivalent to one ton of \(\hbox {CO}_2\), can be traded and used by industrialized countries to meet a part of their emission reduction targets under the Kyoto Protocol.

  2. As of April 31st, 2021, there are 7,854 CDM projects registered with more than 8.1 billion tons of CER credits expected by the end of 2021. The information is available via https://cdm.unfccc.int/Statistics/Public/CDMinsights/index.html.

  3. The NBER Patent Data Project, matched between USPTO patents to the North America Compustat data at Wharton Research Data Services, provides patents and citations of listed firms during the 1976–2006 period.

  4. Existing work has estimated the impacts of CDM on the sustainable development, such as additionality in emission reductions (Zhang and Wang 2011; Dechezleprêtre et al. 2014), renewable energy deployment (Kim and Park 2018), labor employment (Mori-Clement and Bednar-Friedl 2019), and poverty alleviation (Du and Takeuchi 2019).

  5. These effects vary by energy type, with the pronounced effect on inducing biofuel innovation.

  6. Our analysis does not include CDM projects related to HFCs and Transportation.

  7. Using this firm-level patent database, Cui et al. (2018, 2021) study the effects of emission trading schemes on low-carbon innovation and firm competitiveness in China.

  8. The WIPO Green Inventory reports seven categories of environmentally friendly technologies. The two categories that are related to our analysis are alternative energy production and energy conservation. Under the category of alternative energy production, it further decomposes the IPC lists for biofuels, wind, solar, hydro, and geothermal energy as subcategories. For energy efficiency, we retrieve those in the category of energy conservation. The detailed IPC list could be accessed via the link https://www.wipo.int/classifications/ipc/green-inventory/home.

  9. We use log(1+x) as a measure for the logarithm number of patents. Similar logarithm transformation is applied for all patent and citation variables throughout this paper.

  10. The literature suggests patent family size or claims to measure innovation quality (Hall and Harhoff 2012). Unfortunately, we do not obtain this information.

  11. We are grateful for one anonymous referee’s constructive comments on designing this summary table.

  12. In August 2011, the General Office of the State Council of China implemented the Twelfth Five-Year Plan for Energy Conservation and Emission Reduction, setting provincial and industrial targets of energy conservation and emission reductions.

  13. An alternative model specification allowing for the city-year fixed effect is not desirable due to the overstretch of limited observations.

  14. In Row E, 109 treated firms and 145 control firms are removed from the sample, leading to a substantial drop in sample size

  15. We end up with only 62 treated firms.

  16. A common pool of foreign sponsor countries includes Japan, Sweden, Italy, Netherlands, the United States, Switzerland, Denmark, Luxembourg, Ireland, Germany, Austria, Czech Republic, Norway, Belgium, Singapore, Latvia, Finland, France, United Kingdom, Spain, Portugal, Republic of Korea, and Australia. In Appendix, Figure A4 plots the number of China CDM projects sponsored by foreign countries.

  17. Utility model patents do not report backward citations, hence are excluded in this Table.

  18. We are not able to observe the knowledge stock of each foreign firm, government, or financial institution. Instead, we construct the knowledge stock using their corresponding countries’ knowledge stock.

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Authors and Affiliations

  1. Division of Social Sciences, Environmental Research Center, and Data Science Research Center, Duke Kunshan University, Kunshan, China

    Jingbo Cui

  2. University Program in Environmental Policy, Nicholas School of the Environment and Sanford School of Public Policy, Duke University, Durham, NC, USA

    Zhenxuan Wang

  3. China-UK Low Carbon College and SJTU-UNIDO Joint Research Institute for Green Growth, Shanghai Jiao Tong University, Shanghai, China

    Haishan Yu

Authors
  1. Jingbo Cui
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  2. Zhenxuan Wang
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  3. Haishan Yu
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Correspondence to Zhenxuan Wang.

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The authors thank Eli Fenichel, Roger von Haefen, Billy Pizer, Chunhua Wang, Min Wang, Junjie Wu, Haitao Yin, Junjie Zhang, Editor Robert Elliott, and anonymous referees for comments and suggestions. This paper also benefits from discussions with conference participants at 2019 Environmental Economics Workshops in Shanghai Jiao Tong University and Shanghai University of Finance and Economics, 2019 AERE Conference, 2020 EAERE Conference, and 2021 PKU-CCER Conference. Cui acknowledges fund support from  the Kunshan Municipal Government research funding. All remaining errors are our own.

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Cui, J., Wang, Z. & Yu, H. Can International Climate Cooperation Induce Knowledge Spillover to Developing Countries? Evidence from CDM. Environ Resource Econ 82, 923–951 (2022). https://doi.org/10.1007/s10640-022-00697-8

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