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

31 Pages Posted: 3 Aug 2007 Last revised: 18 Jul 2014

See all articles by Valentina Bosetti

Valentina Bosetti

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; Green Growth Knowledge Platform; International Center for Climate Governance

Emanuele Massetti

Georgia Institute of Technology; CESifo (Center for Economic Studies and Ifo Institute); CMCC - Euro Mediterranean Centre for Climate Change

Massimo Tavoni

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

Multiple version iconThere are 2 versions of this paper

Date Written: November 2007

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 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? 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. We also 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 stabilizing GHG concentrations are then singled out.

Keywords: Climate Policy, Energy R&D, International R&D Spillovers, Stabilization

JEL Classification: H0, H2, H3

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 (November 2007). CESifo Working Paper Series No. 2151; FEEM Working Paper No. 82.2007; University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 11_07; CMCC Research Paper No. 12. Available at SSRN: https://ssrn.com/abstract=1004045

Valentina Bosetti (Contact Author)

Bocconi University

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Carlo Carraro

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Emanuele Massetti

Georgia Institute of Technology ( email )

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Massimo Tavoni

Fondazione Eni Enrico Mattei (FEEM) ( email )

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Princeton University - Princeton Environmental Institute

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