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ABSTRACT:
This paper studies countries’ incentives to develop advanced pollution abatement technology when technology may spillover across countries and pollution abatement is a global public good. We are motivated in part by the problem of global warming: a solution to this involves providing a global public good, and will surely require the development and implementation of new technologies. We show that at the Nash equilibrium of a simultaneous-move game with R&D investment and emission abatement, whether the free rider effect prevails and under-investment and excess emissions occur depends on the degree of technology spillovers and the effect of R&D on the marginal abatement costs. There are cases in which, contrary to conventional wisdom, Nash equilibrium investments in emissions reductions exceed the first-best case

SUGGESTED CITATION:
Geoffrey M. Heal and Nori Tarui, "Technology Diffusion, Abatement Cost, and Transboundary Pollution" (January 16, 2009). Fondazione Eni Enrico Mattei Working Papers. Working Paper 255.
http://www.bepress.com/feem/paper255