Carbon Leakage With International Technology Spillovers

27 Pages Posted: 15 Apr 2007

See all articles by Reyer Gerlagh

Reyer Gerlagh

Tilburg University - Center and Faculty of Economics and Business Administration

Onno Kuik

VU University Amsterdam - Institute for Environmental Studies (IVM)

Date Written: Mach 2007

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

JEL Classification: F18, O39, Q25, Q4

Suggested Citation

Gerlagh, Reyer and Kuik, Onno, Carbon Leakage With International Technology Spillovers (Mach 2007). FEEM Working Paper No. 33.2007. Available at SSRN: https://ssrn.com/abstract=979915 or http://dx.doi.org/10.2139/ssrn.979915

Reyer Gerlagh (Contact Author)

Tilburg University - Center and Faculty of Economics and Business Administration ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Onno Kuik

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1085
Amsterdam, 1081 HV
Netherlands
+31 20 5989513 (Phone)
+31 20 5989553 (Fax)

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