Discussion Paper

No. 2013-50 | September 24, 2013
Timing of Adoption of Clean Technologies, Transboundary Pollution and International Trade

Abstract

The authors consider a symmetric model composed of two countries and a firm in each country. Firms produce the same good by means of a polluting technology which uses fossil energy. However, these firms can adopt a clean technology which uses a renewable energy having a lower unit cost. Surprisingly, opening markets to international competition increases the per-unit emission-tax and decreases the per-unit production subsidy. Interestingly, the socially optimal adoption date under a common market better internalizes transboundary pollution than that under autarky. It also better internalizes transboundary pollution compared with the optimal adoption dates for firms. In autarky (resp. a common market), firms adopt the clean technology earlier (resp. later) than what is socially optimal and, therefore, regulators can induce clean technology adoption at the socially optimal adoption date by giving firms postpone (resp. speed up) adoption subsidies. Opening markets to international trade, speeds up socially optimal adoption dates and delays optimal adoption dates for firms. Consequently, with market opening, speed up adoption subsidies are needed to reduce the global flow of pollution.

JEL Classification

D62 F18 H57 Q42 Q55

Cite As

Mehdi Ben Jebli and Slim Ben Youssef (2013). Timing of Adoption of Clean Technologies, Transboundary Pollution and International Trade. Economics Discussion Papers, No 2013-50, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2013-50

Assessment



Comments and Questions


Anonymous - Referee Report
January 08, 2014 - 09:00

see attached file


Slim Ben Youssef - Reply to Referee Report
February 25, 2014 - 08:38

see attached file


Slim Ben Youssef - Revised Version
February 25, 2014 - 08:40

see attached file