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
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
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