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North-South diffusion of climate-mitigation technologies: the crowding-out effect on relocation

Published online by Cambridge University Press:  22 January 2020

Julie Ing  and
Jean-Philippe Nicolaï Open the ORCID record for Jean-Philippe Nicolaï [Opens in a new window]
Julie Ing
Affiliation:
University of Rennes 1, CREM (Centre de Recherche en Economie et Management), Rennes, France
Jean-Philippe Nicolaï*
Affiliation:
EconomiX-CNRS, University of Paris Nanterre, France ETH Zürich, Switzerland
*
*Corresponding author. E-mail: [email protected]
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Abstract

The deployment of cleaner production technologies is supposed to be crucial to mitigate the effect of climate change. The diffusion of technology from developed to developing countries can be done through different channels. It can be a business decision such as firms' relocation, opening of a subsidiary or the adoption of technology by southern firms, or it may be decided at the government level. This paper investigates, in a two-country model (North and South), the relationship between the diffusion of mitigation technologies, firms' relocation and the environment. We assume that both countries implement a carbon tax and there are two kinds of production technology used: a relatively clean technology and a dirty one. This paper theoretically shows that the technology diffusion by technology adoption, public transfer or subsidiary creation induces a decrease in relocation, while technology diffusion via purchasing dirty southern firms may increase the number of relocated firms. The paper also demonstrates that technology diffusion may have perverse effects in the long run. Indeed, total emissions may increase with technology diffusion since southern firms become more competitive.

Keywords

technology diffusioncarbon taxrelocationtrade of polluting goodsimperfect competitionsubsidiarypublic transfer

JEL classification

Q58: Government Policy Q53: Air Pollution • Water Pollution • Noise • Hazardous Waste • Solid Waste • Recycling L13: Oligopoly and Other Imperfect Markets
Type
Research Article
Information
Environment and Development Economics , Volume 25 , Special Issue 1: The Economics of Climate Change and Sustainability (Part B) , February 2020 , pp. 21 - 43
Copyright
Copyright © Cambridge University Press 2020

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