Low-carbon technology transfer between rival firms under cap-and-trade policies

Abstract

We investigate the effects of low-carbon technology transfer between two rival manufacturers on their economic, environmental, and social welfare performance under a cap-and-trade policy. We model alternative licensing arrangements of technology transfer and evaluate the model performance from the perspectives of different stakeholders, including manufacturers, customers, and policy makers. Our findings show that the contractual choice on low-carbon technology licensing is dependent on the trade-off between the benefits gained from the licensing of technology and the consequential losses incurred from competition with a strengthened competitor, which is influenced by a combination of factors, including internal technological abilities, the interfirm power relationship, external market competition, and the carbon emission control policy. Among them, the interfirm power relationship is most influential in determining the optimal contractual decision. In addition, we extend the analysis of technology licensing strategies to different carbon emissions caps with additional cost incurred from purchasing emission allowances through auction, and a two-period model considering emissions cap reduction, respectively. Finally, our analyses show it is critical for policy makers to develop appropriate emissions control policies to promote the agenda of a sustainable, low-carbon economy.