TY - JOUR
T1 - Double Free-Riding in Innovation and Abatement
T2 - A Rules Treaty Solution
AU - Gersbach, Hans
AU - Oberpriller, Quirin
AU - Scheffel, Martin
N1 - Funding Information:
We would like to thank Clive Bell, Hans Haller, Antoine Bommier, Noemi Hummel, Marie-Catherine Riekhof participants at EAERA 2012 in Prague, at the workshop Uncertainty, Risk and Climate in Zurich and the Astute Modeling seminar for valuable comments. Financial support from the Swiss National Science Foundation, Project No. 100014-124440, is gratefully acknowledged.
Publisher Copyright:
© 2018, Springer Nature B.V.
PY - 2019/6/1
Y1 - 2019/6/1
N2 - In addressing climate change, both abatement itself and the innovation of superior abatement technologies are exposed to free-riding. To examine this double free-riding problem, we develop a multi-country model with an international market for emission permits and licenses for abatement technologies. We show that the two problems are mutually reinforcing. To address the double free-riding problem we propose a rules treaty for innovation and abatement that consists of two rules, an allocation rule and a refunding rule. The allocation rule determines the share of issued emission permits that each country can directly allocate to its domestic firms, while the remainder is handed over to an international agency. The refunding rule determines how the agency’s revenues from selling these permits to firms are redistributed. A fraction is given to those countries that successfully develop superior abatement technologies provided they license the technology free of charge to all countries. The remaining revenues are redistributed to all countries. These rules can approximate globally optimal abatement and innovation levels.
AB - In addressing climate change, both abatement itself and the innovation of superior abatement technologies are exposed to free-riding. To examine this double free-riding problem, we develop a multi-country model with an international market for emission permits and licenses for abatement technologies. We show that the two problems are mutually reinforcing. To address the double free-riding problem we propose a rules treaty for innovation and abatement that consists of two rules, an allocation rule and a refunding rule. The allocation rule determines the share of issued emission permits that each country can directly allocate to its domestic firms, while the remainder is handed over to an international agency. The refunding rule determines how the agency’s revenues from selling these permits to firms are redistributed. A fraction is given to those countries that successfully develop superior abatement technologies provided they license the technology free of charge to all countries. The remaining revenues are redistributed to all countries. These rules can approximate globally optimal abatement and innovation levels.
KW - 512 Business and Management
KW - Climate change
KW - Global refunding scheme
KW - International permit markets
KW - Licensing
KW - Patent
KW - Rules treaty
KW - Technological innovation
UR - http://www.scopus.com/inward/record.url?scp=85052649003&partnerID=8YFLogxK
U2 - 10.1007/s10640-018-0270-8
DO - 10.1007/s10640-018-0270-8
M3 - Article
AN - SCOPUS:85052649003
SN - 0924-6460
VL - 73
SP - 449
EP - 483
JO - Environmental and Resource Economics
JF - Environmental and Resource Economics
ER -
