Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 03/2006: Endogenous technology and tradable emission quotas

Rolf Golombek () and Michael Hoel ()
Additional contact information
Rolf Golombek: The Ragnar Frisch Centre for Economic Research, Postal: Gaustadalléen 21, N-0349 Oslo, Norway
Michael Hoel: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway

Abstract: We study an international climate agreement that assigns emission quotas to each participating country. Unlike the simplest models in the literature, we assume that abatement costs are affected by R&D activities undertaken in all firms in all countries, i.e. abatement technologies are endogenous. In line with the Kyoto agreement we assume that the international climate agreement does not include R&D policies. We show that for a secondbest agreement, marginal costs of abatement should exceed the Pigovian level. Moreover, marginal costs of abatement differ across countries in the second-best quota agreement with heterogeneous countries. In other words, the second-best outcome cannot be achieved if emission quotas are tradable.

Keywords: Climate policy; international climate agreements; emission quotas; technology spillovers

JEL-codes: H23; O30; Q20; Q25; Q28

16 pages, February 17, 2006

Full text files

Memo-03-2006.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Mari Strønstad Øverås ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2024-02-05 17:13:11.