International technology diffusion, multilateral R&D coordination, and global climate mitigation

Abstract

The issues of complementing emission-based international climate agreements with technology-oriented ones have been placed high upon future climate policy and research agenda. This paper is motivated to explore the fundamental mechanism of international technology coordination for global climate mitigation. We first present a partial equilibrium analytical model that intuitively unveils the basic mechanism of multilateral R&D coordination for saving climate mitigation costs. This mechanism is then quantitatively assessed in a multi-region general equilibrium numerical model that explicitly specifies the technology externality resulting from cross-country knowledge diffusion. Results show that: (1) By fully internalizing the technology externality of cross-country knowledge diffusion, multilateral R&D coordination can stimulate country-specific R&D efforts and cross-country technology diffusion; (2) Innovation enhanced by multilateral R&D coordination facilitates knowledge creation, which has a notable effect to boost economic growth and carbon savings in each participating country; and (3) By lowering the climate mitigation costs incurred by traditional emission-based climate policies, the technology-oriented agreements like multilateral R&D coordination can stimulate the incentives for mitigation action and improve the environmental effectiveness of global climate mitigation efforts.