Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/181611
Authors: 
Gersbach, Hans
Riekhof, Marie-Catherine
Year of Publication: 
2018
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2018: Digitale Wirtschaft - Session: Environmental Economics V E06-V2
Abstract: 
Innovation clusters that combine public basic research and applied research performed by private firms may be needed for greater technological advances to slow down climate change. We use a multi-country model with emissions permit trade to examine how international climate policy can induce countries to create such clusters. We allow for a varying degree of cooperation between the countries, represented by different carbon price targets. We find that a minimal carbon price is needed to attract applied research firms, but countries may nevertheless fail to invest in basic research. We construct a mechanism that can overcome this barrier and that can induce the first-best creation of innovation clusters. The mechanism involves a combination of few permits given to the country with the lowest costs for basic research, fair burden-sharing and maximal grandfathering.
Subjects: 
International permit markets
Carbon prices
Innovation clusters
Basic research
Applied R&D
Climate change mitigation
Externalities
JEL: 
H23
Q54
O32
Document Type: 
Conference Paper
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