Carbon Leakage with International Technology Spillovers

Reyer Gerlagh and Onno Kuik

No 2007.33, Working Papers from Fondazione Eni Enrico Mattei

Abstract: In this paper we study the effect of international technology spillovers on carbon leakage. We first develop and analyse two simple competing models for carbon leakage. The first model represents the pollution haven hypothesis. It focuses on the international competition between firms that produce energy-intensive goods. The second model highlights the role of a globally integrated carbon-energy market. We calculate formulas for the leakage rates in both models and, through meta-analysis, show that the second model captures best the major mechanisms reported in the CGE literature on carbon leakage. We extend this model with endogenous energy-saving technology and international technology spillovers. This feature is shown to decrease carbon leakage. We build-in the endogenous energy-saving technology in a large CGE model and verify that the results from the formal model carry over. Carbon leakage becomes negative for moderate levels of international technology spillover.

Keywords: arbon-Leakage, Climate Policy, Induced Technological Change; Trade and Environment (search for similar items in EconPapers)
JEL-codes: F18 O39 Q25 Q4 (search for similar items in EconPapers)
Date: 2007-03
New Economics Papers: this item is included in nep-ene and nep-env
References: Add references at CitEc
Citations: View citations in EconPapers (80)

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Working Paper: Carbon Leakage with International Technology Spillovers (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2007.33

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