Title

Climate policy, learning, and technology adoption in small countries

Document Type

Journal article

Source Publication

Environmental and Resource Economics

Publication Date

3-2012

Volume

51

Issue

3

First Page

391

Last Page

411

Publisher

Springer Netherlands

Keywords

Abatement technology, Auctioned permits, Emission standards, Harmonized taxes, International environmental agreements, Learning, Small countries

Abstract

A significant reduction in global greenhouse gas emissions requires international cooperation in emission abatement as well as individual countries’ investment in the adoption of abatement technology. The existing literature on climate policy pays insufficient attention to small countries, which account for a substantial proportion of global emission. In this study, we investigate how climate policy and learning about climate damage affect investment in abatement technology in small countries. We consider three alternative climate policy instruments: emission standards, harmonized taxes and auctioned permits. We say that learning is feasible if an international environmental agreement (IEA) is formed after the resolution of uncertainty about climate damage. We find that, either with learning and quadratic abatement costs or without learning, harmonized taxes outperform emission standards and auctioned permits in terms of investment efficiency. Without learning, a large cost of nonparticipation (that a country incurs) in the IEA can be beneficial to the country. Whether learning improves investment efficiency depends on the size of this nonparticipation cost.

DOI

10.1007/s10640-011-9504-8

Print ISSN

09246460

E-ISSN

15731502

Publisher Statement

Copyright © Springer Science+Business Media B.V. 2011

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Recommended Citation

Hong, F., & Wang, S. (2012). Climate policy, learning, and technology adoption in small countries. Environmental and Resource Economics, 51(3), 391–411. doi: 10.1007/s10640-011-9504-8