## Can International Technological Diffusion Substitute for Coordinated Global Policies to Mitigate Climate Change?

_IMF Working Papers, June 25, 2021_

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## Bibliographic details
- Authors: Philip Barrett
- Published: June 25, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513585765.001

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### Executive summary and key finding
- Main conclusion: International technological diffusion can substitute for coordinated global policies to mitigate climate change — "In short, yes."
- Model used: multi-region integrated assessment model with fuel-specific endogenous technical change.
- Core scenario outcome: When innovation can diffuse overseas, long-run temperature increases are limited to 3 degrees.
- Counterfactual: Without international technological diffusion, Europe and China reducing emissions to zero by mid-century is insufficient to avoid catastrophic climate change.
- Mechanism: Policy in emissions-reducing regions both encourages green innovations and dissuades dirty innovations that would otherwise spread.

### Model setup and scenarios
- Geographic focus: Europe and China reducing emissions to zero by mid-century.
- Key model feature: fuel-specific endogenous technical change.
- Diffusion scenarios:
  - No international technological diffusion: insufficient mitigation; catastrophic climate change implied.
  - With international technological diffusion: long-run temperature increases limited to 3 degrees.

### Policy packages and effectiveness
- Most effective package in emissions-reducing regions:
  - Research subsidy funded by a carbon tax.
  - Short-term effect: carbon tax directly alters the composition of energy.
  - Longer-term effect: research subsidies induce innovation that further reduces emissions.
- Ineffective policy:
  - Green production subsidies are ineffective because they undermine incentives for innovation.

### Subject areas and keywords
- Subjects: Carbon tax, Climate policy, Environment, Financial sector policy and analysis, Greenhouse gas emissions, Spillovers, Taxes.
- Keywords: Carbon tax, Climate policy, energy-producing firm, Europe, Global, green production subsidy, Greenhouse gas emissions, package in emissions-reducing region, policy package, research subsidy, Spillovers.

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_Source: https://www.imf.org/en/publications/wp/issues/2021/06/25/can-international-technological-diffusion-substitute-for-coordinated-global-policies-to-460902_