Can International Technological Diffusion Substitute for Coordinated Global Policies to Mitigate Climate Change?

June 25, 2021

Preview Citation

Format: Chicago

Philip Barrett. Can International Technological Diffusion Substitute for Coordinated Global Policies to Mitigate Climate Change?, (USA: International Monetary Fund, 2021) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

In short, yes. I use a multi-region integrated assessment model with fuel-specific endogenous technical change to examine the impact of Europe and China reducing emissions to zero by mid-century. Without international technological diffusion this is insufficient to avoid catastrophic climate change. But when innovation can diffuse overseas, long-run temperature increases are limited to 3 degrees. This occurs because policy not only encourages green innovations but also dissuades dirty innovations which would otherwise spread. The most effective policy package in emissions-reducing regions is a research subsidy funded by a carbon tax, driven in the short term by the direct effect of the carbon tax on the composition of energy, and later by innovation induced by research subsidies. Green production subsidies are ineffective because they undermine incentives for innovation.

Subject: Carbon tax, Climate policy, Environment, Financial sector policy and analysis, Greenhouse gas emissions, Spillovers, Taxes

Keywords: Carbon tax, Climate policy, Energy-producing firm, Europe, Global, Green production subsidy, Greenhouse gas emissions, Package in emissions-reducing region, Policy package, Research subsidy, Spillovers

Publication Details

Pages:

76
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/173
Stock No:

WPIEA2021173
ISBN:

9781513585765
ISSN:

1018-5941

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