Abstract

http://ssrn.com/abstract=1138539
 
 

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International Energy R&D Spillovers and the Economics of Greenhouse Gas Atmospheric Stabilization


Valentina Bosetti


Fondazione Eni Enrico Mattei (FEEM); Bocconi University; CMCC - Euro Mediterranean Centre for Climate Change

Carlo Carraro


Fondazione Eni Enrico Mattei (FEEM); Ca' Foscari University of Venice; CMCC - Euro Mediterranean Centre for Climate Change (Climate Policy Division); IPCC; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Centre for European Policy Studies, Brussels

Emanuele Massetti


Fondazione Eni Enrico Mattei (FEEM) & Euro-Mediterranean Center for Climate Change; CMCC - Euro Mediterranean Centre for Climate Change

Massimo Tavoni


Fondazione Eni Enrico Mattei (FEEM); Princeton University - Princeton Environmental Institute

August 2007

CEPR Discussion Paper No. DP6426

Abstract:     
It is widely recognized that technological change has the potential to reduce GHG emissions without compromising economic growth; hence, any better understanding of the process of technological innovation is likely to increase our knowledge of mitigation possibilities and costs. This paper explores how international knowledge flows affect the dynamics of the domestic R&D sector and the main economic and environmental variables. The analysis is performed using WITCH, a dynamic regional model of the world economy, in which energy technical change is endogenous. The focus is on disembodied energy R&D international spillovers. The knowledge pool from which regions draw foreign ideas differs between High Income and Low Income countries. Absorption capacity is also endogenous in the model. The basic questions are as follows. Do knowledge spillovers enhance energy technological innovation in different regions of the world? Does the speed of innovation increase? Or do free-riding incentives prevail and international spillovers crowd out domestic R&D efforts? What is the role of domestic absorption capacity and of policies designed to enhance it? Do greenhouse gas stabilization costs drop in the presence of international technological spillovers? The new specification of the WITCH model presented in this paper enables us to answer these questions. Our analysis shows that international knowledge spillovers tend to increase free-riding incentives and decrease the investments in energy R&D. The strongest cuts in energy R&D investments are recorded among High Income countries, where international knowledge flows crowd out domestic R&D efforts. The overall domestic pool of knowledge, and thus total net GHG stabilization costs, remain largely unaffected. International spillovers, however, are also an important policy channel. We therefore analyze the implication of a policy mix in which climate policy is combined with a technology policy designed to enhance absorption capacity in developing countries. Significant positive impacts on the costs of stabilising GHG concentrations are singled out. Finally, a sensitivity analysis shows that High Income countries are more responsive than Low Income countries to changes in the parameters and thus suggests to focus additional empirical research efforts on the former.

Number of Pages in PDF File: 29

Keywords: Climate policy, Energy R&D, GHG stabilisation, International R&D Spillovers

JEL Classification: H0, H1, H2

working papers series


Date posted: May 30, 2008  

Suggested Citation

Bosetti, Valentina and Carraro, Carlo and Massetti, Emanuele and Tavoni, Massimo, International Energy R&D Spillovers and the Economics of Greenhouse Gas Atmospheric Stabilization (August 2007). , Vol. , pp. -, 2007. Available at SSRN: http://ssrn.com/abstract=1138539

Contact Information

Valentina Bosetti (Contact Author)
Fondazione Eni Enrico Mattei (FEEM) ( email )
C.so Magenta 63
Milano, 20123
Italy
Bocconi University ( email )
Via Gobbi 5
Milan, 20136
Italy
CMCC - Euro Mediterranean Centre for Climate Change
Viale Gallipoli, 49
Lecce, 73100
Italy
Carlo Carraro
Fondazione Eni Enrico Mattei (FEEM) ( email )
Isola di San Giorgio Maggiore 8
Venezia, 30124
Italy
+39 04 12700460 (Phone)
+39 04 12700412 (Fax)
Ca' Foscari University of Venice ( email )
Cannaregio 873
Venice, 30121
Italy
+39 04 1234 9166 (Phone)
+39 04 1234 9176 (Fax)
CMCC - Euro Mediterranean Centre for Climate Change (Climate Policy Division) ( email )
Via Augusto Imperatore 16
Lecce, 73100
Italy
+39 0832 288650 (Phone)
+39 0832 277603 (Fax)
IPCC ( email )
C/O World Meteorological Organization
7bis Avenue de la Paix
Geneva, CH-1211
Switzerland
+41-22-730-8208/54/84 (Phone)
+41-22-730-8025/13 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Centre for European Policy Studies, Brussels
1 Place du Congres
B-1000 Brussels, 1000
Belgium
+32 2 229 3911 (Phone)
+32 2 219 4151 (Fax)
Emanuele Massetti
Fondazione Eni Enrico Mattei (FEEM) & Euro-Mediterranean Center for Climate Change ( email )
Corso Magenta 63
20123 Milan
Italy
CMCC - Euro Mediterranean Centre for Climate Change
Viale Gallipoli, 49
Lecce, 73100
Italy
Massimo Tavoni
Fondazione Eni Enrico Mattei (FEEM) ( email )
Corso Magenta 63
20123 Milan
Italy
Princeton University - Princeton Environmental Institute
22 Chambers Street
Princeton, NJ 08544
United States

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