Technology diffusion and climate action: A leader-follower model

Abstract

Abstract Can a small technology-developing country increase technology diffusion to developing countries in climate action? We argue that when a country takes into account all direct and indirect benefits from pushing forward the transnational diffusion of national green technology, a free transfer may give the country a net benefit. This result is driven by the idea that technology transfer partnerships enable the countries to tailor technology development to best fit the special circumstances of receiving countries. Such decentralized cooperation can pave the way for scalable technology diffusion. The focus is on one country's renewable energy technology development and how this can affect climate action in major developing countries such as China and India. We propose a leader-follower model between the technology-developing country and the developing country that allows complex payoffs and focuses on a situation in which one country makes a cooperative move to solve the inherent collective action problem. This effective shared learning platform has an upscaling potential, and international organizations, such as the European External Action Service, could further facilitate technology diffusion to developing countries. JEL codes D73, O19, Q56