Understanding technology diffusion: a key to sound policy making

Understanding the mechanism of technology diffusion, for its important repercussions on development, is a tremendously important task. In particular, the transfer of new, more efficient and less polluting ways of producing energy is beneficial in many ways: it can reduce energy poverty, alleviate local pollution and lower the cost of transitioning towards a low-carbon society. Although fast-developing countries such as China, Brazil and India are rapidly approaching the top innovators, innovation in energy technologies is concentrated in a few developed countries, which account for the majority of R&D spending worldwide. Conversely, in future years the increase in energy production will be mainly concentrated in developing countries. Reducing global CO₂ emissions will therefore not only require that developed countries adopt and diffuse low carbon technologies at home, but also that they promote the use of GHG-reducing technologies abroad.

In Bosetti and Verdolini,  we model the decision to transfer technological know-how. This framework can in general be applied to many different contexts, but we concentrate on energy technologies because they are of particular relevance in the current debate regarding climate change and sustainable development. We empirically test the model using carefully selected patent data.

In Bosetti and De Cian, we investigate the conditions under which carbon-free technologies might be adopted by countries that have not signed a climate agreement as opposed to conditions under which free-riding incentives prevail. By means of a simple numerical model we find that if a partial coalition, composed of OECD countries, cooperates to reduce their 2050 emissions between 30 and 35% below 2005 levels, the technology effect would prevail and the carbon-free technology would spill over to the rest of the world.  Conversely, had the OECD coalition embraced a more demanding target (e.g. 2050 emissions 50% below their 2005 levels), then the leakage effect would have prevailed and non-signatories would have eroded the coalition’s environmental effectiveness. To mitigate the risk of carbon leakage associated with more ambitious targets, credible future commitments for developing countries could be set, as they would reduce lock-in in carbon-intensive technologies.