Climate policy, learning, and technology adoption in small countries

Fuhai HONG, Susheng WANG

Research output: Journal PublicationsJournal Article (refereed)

2 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)391-411
Number of pages21
JournalEnvironmental and Resource Economics
Volume51
Issue number3
DOIs
Publication statusPublished - 1 Mar 2012
Externally publishedYes

Keywords

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

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