The effects of climate change technology spillovers on carbon emissions across European countries

Abstract

To unravel the challenges in the global diffusion of climate-friendly technologies, this investigation analyzes the diffusion of climate change-related technologies across countries. By using an unbalanced panel of selected European countries over the period 1990-2020, this investigation quantifies the carbon dioxide (CO2) emission effects of the diffusion of climate change-related technologies that are mediated by imports, geographical and technological proximity and free diffusion of technologies. In this study, the effects of domestic development of climate change-related technologies, population and affluence are also accounted for, and the emission effects are estimated using a fixed-effects panel model with instrumental variables. The instrumental variable for foreign technology spillovers is based on the technology support policies adopted in foreign countries. As expected, international spillovers of climate-friendly technologies are negatively linked to CO2 emissions, thus promoting emission reductions across the region. Importantly, emission reductions in Europe are more strongly influenced by international technology spillovers than by domestic innovation activities. Moreover, while all the analyzed technology diffusion channels appear relevant, the results are the most robust regarding import-mediated technology spillovers. Insights from this study support policy recommendations, especially in the trade policy context.