Andres, Pia, Penny Mealy, Nils Handler, and Sam Fankhauser (2023): “Stranded Nations? Transition Risks and Opportunities Towards a Clean Economy” Environ. Res. Lett. in press https://doi.org/10.1088/1748-9326/acc347
Abstract The transition away from a fossil-fuel powered economy towards a cleaner production system will create winners and losers in the global trade system. We compile a list of ‘brown’ traded products whose use is highly likely to decline if the world is to mitigate climate change, and highlight which countries are most at risk of seeing their productive capabilities ‘stranded’. Using methods from economic geography and complexity, we develop novel measures of transition risk that capture the extent to which countries’ export profiles are locked-in to brown products. We show that countries exporting a high number of brown products, especially technologically sophisticated ones, could find it relatively easy to transition. Conversely, countries with exports highly concentrated in a few, low-complexity brown products have much fewer nearby diversification opportunities. Our results suggest that export complexity and diversity play a key role in determining transition risk. Path-breaking diversification strategies are needed to prevent nations from becoming stranded.
Andres, Pia (2023): Industrial Policy and Global Public Goods Provision: Rethinking the Environmental Trade Agreement Centre for Climate Change Economics and Policy Working Paper 413/Grantham Research Institute on Climate Change and the Environment Working Paper 388. London: London School of Economics and Political Science
Abstract Countries around the world increase the downstream cost of low carbon technologies using anti-dumping duties and local content requirements, while simultaneously blaming inadequate efforts to address climate change on the economic cost of doing so. This paper presents a 2-country, 2-period strategic model of trade in a clean technology in the presence of differential country-level production costs and imperfect competition. If the difference in production cost is large enough and learning-by-doing allows the laggard country to catch up, then in the absence of production subsidies remaining in autarky during Stage 1 of the game can be welfare-improving for both countries. This result is strengthened when both countries use consumer subsidies. When countries choose their policy mixes, the Nash Equilibrium involves both trade and production subsidies on the part of the high cost country. The analysis suggests that an environmental trade agreement is most likely to be beneficial if production subsidies for clean technology are explicitly permitted.
Andres, Pia (2022): Was the Trade War Justified? Solar PV Innovation in Europe and the Impact of the “China Shock” Centre for Climate Change Economics and Policy Working Paper 404/Grantham Research Institute on Climate Change and the Environment Working Paper 379. London: London School of Economics and Political Science
Abstract Low cost solar energy is key to enabling the transition away from fossil fuels. Despite this, the European Union followed the United States’ example in imposing anti-dumping tariffs on solar panel imports from China in 2012, arguing that Chinese panels were unfairly subsidized and harmed its domestic industry. This paper examines the effects of Chinese import competition on firm-level innovation in solar photovoltaic technology by European firms using a sample of 4,632 firms in 14 EU countries over the period 1999-2018. I show that firms which were exposed to higher import competition innovated more. Further, I find that during the years following the trade war, firms with a higher existing stock of innovation became less innovative. The results imply that competition from China constituted a positive push for more innovation among European solar innovators, calling into question the rationale behind the trade war.
Andres, Pia, Eugenie Dugoua, and Marion Dumas (2022): Directed Technological Change and General Purpose Technologies: Can AI Accelerate Clean Energy Innovation? Centre for Climate Change Economics and Policy Working Paper 403/Grantham Research Institute on Climate Change and the Environment Working Paper 378. London: London School of Economics and Political Science
Abstract Transitioning away from dirty and towards clean technologies is critical to reduce carbon emissions, but the race between clean and dirty technologies is taking place against the backdrop of improvements in general-purpose technologies (GPT) such as information and communication technologies (ICT) and artificial intelligence (AI). We show how, in theory, a GPT can affect the direction of technological change and, in particular, the competition between clean and dirty technologies. Second, we use patent data to show that clean technologies absorb more spillovers from AI and ICT than dirty technologies and that energy patenting firms with higher AI knowledge stocks are more likely to absorb AI spillovers for their energy inventions. We conclude that ICT and AI have the potential to accelerate clean energy innovation.