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Title:Endogenous technology and tradable emission quotas PDF Logo
Authors:Golombek, Rolf
Hoel, Michael
Issue Date:2006
Series/Report no.:Memorandum, Department of Economics, University of Oslo 2006,03
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.
Subjects:Climate policy
international climate agreements
emission quotas
technology spillovers
JEL:H23
O30
Q20
Q25
Q28
Document Type:Working Paper
Appears in Collections:Memorandum, Department of Economics, University of Oslo

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