The Incentives for North-South Transfer of Climate-Mitigation Technologies with Trade in Polluting Goods
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The need to transfer climate mitigation technologies towards the developing world has been acknowledged since the beginning of climate negotiations. Little progress has however been made, as shown by Article 10 of the Paris Agreement. One reason is that these technologies could become vital assets to compete on global markets. This paper presents a partial equilibrium model with two regions, the North and the South, and imperfect competition in the international polluting goods market, to analyze the North’s incentives to accept technology transfer. Results crucially depend on the existence of environmental cooperation. When both northern and southern governments set emission quotas non-cooperatively, inducing fewer global emissions is a necessary, but not sufficient condition for the North to accept the transfer. In contrast, when governments set quotas cooperatively, the North has no incentive to share its technology either before or after the agreement. Technology transfer commitments may be included in the agreement, but with no effect on global emissions and global surplus. The only impacts are distributional, technology transfers and side payments may be substitute instruments.
KeywordsTechnology transfer Imperfect competition Climate policy Environmental cooperation Cap and trade
JEL ClassificationD43 F18 Q5
We would like to thank Jens Horbach and Scott Barett and two anonymous referees for useful advice and comments. We also thank participants at EAERE 2016, FAERE 2015, Economics of Innovation, Diffusion, Growth and the Environment Conference 2015. Financial support is gratefully acknowledged from the Swiss Re Foundation, the ETH Zurich Foundation and the Swiss National Science Foundation.
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