Climate cooperation with technology investments and border carbon adjustment
Climate cooperation with technology investments and border carbon adjustment / Carsten Heim and Robert C. Schmidt. Harvard Project on Climate Agreements, Belfer Center for Science and International Affairs, Harvard Kennedy School, April 2014, 35 p. (Discussion Paper 2014-65)
Authors’s abstract :
A central question in climate policy is whether early investments in low-carbon technologies are a useful first step towards a more effective climate agreement in the future. We introduce a climate cooperation model with endogenous R&D investments where countries protect their international competitiveness via border carbon adjustments (BCA). BCA raises the scope for cooperation and leads to a non-trivial relation between countries’ prior R&D investments and participation in the coalition. We find that early investments in R&D render free-riding more attractive. Therefore, with delayed cooperation on emission abatement and ex-ante R&D investments, the outcome is often characterized by high participation but inefficiently low technology investments and abatement.