Technological change and international interaction in environmental policies

Furukawa, Yuichi and Takarada, Yasuhiro (2013): Technological change and international interaction in environmental policies.

Abstract

This paper considers the impact of differences in endogenous technological change between two countries on global pollution emissions under international strategic interaction in environmental policies. First, we demonstrate that an environmentally lagging country's technology may continue to advance through a learning-by-doing effect until it exceeds the environmental friendliness of a leading country that initially had the cleanest technology (i.e., environmental leapfrogging could occur). Whether a country eventually becomes an environmentally leading country depends on the country size and its awareness of environmental quality. Second, we find that global emissions may increase despite the fact that environmental technology advances in both countries. Global emissions eventually become constant because both countries cease to tighten environmental regulations when their technologies are sufficiently clean. The final emissions might be larger than emissions in early stages of adjustment under dirty technologies. If environmental leapfrogging frequently occurs, both countries possess similarly clean technologies, thereby reducing long-term global pollution.

• Item Type: MPRA Paper
• Language: English
• Keywords: Environmental policy; leapfrogging; learning-by-doing; strategic interaction; technological change; transboundary pollution
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O30 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q55 - Technological Innovation; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O44 - Environment and Growth

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