Scandinavian Working Papers in Economics
Memorandum,
Oslo University, Department of Economics
No 19/2006: Clean development mechanism (CDM) vs. international permit trading – the impact on technological change
Cathrine Hagem ()
Additional contact information
Cathrine Hagem: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Abstract: The clean development mechanism (CDM) under the Kyoto Protocol may induce a technological change in developing countries. As an alternative to the CDM-regime, developing countries may accept a (generous) cap on their own emissions, let domestic producers invest in new efficient technologies, and sell the excess emission permits on the international permit market (cap&trade-regime). The purpose of this paper is to show how the gains from investment, and hence the incentive for investment in new technology may deviate between the two alternative regimes. We show that the difference in gains from investment depends on whether the producers face competitive or non-competitive output markets, whether the investment affects fixed or variable production costs and whether the producers can reduce emissions through other means than investment in new technology
Keywords: Climate Policy; Technology Adoption; Emission Trading; Clean Development Mechanism; Technological Change
27 pages, October 4, 2006
Full text files
Memo-19-2006.pdf
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