Editing IPCC:AR6/WGIII/Chapter-16 (section)

==== 16.2.2.2 Knowledge Spillovers ====

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Knowledge spillovers drive continuous technological change ( [[#Romer--1990|Romer 1990]] ; [[#Rivera-Batiz--1991|Rivera-Batiz and Romer 1991]] ) and are for that reason relevant to climate technologies as well as incumbent, carbon-intensive technologies. Knowledge embedded in innovations by one innovator gives an opportunity for others to create new innovations and increase the knowledge stock even further. The constant growth of knowledge stock through spillovers translates into constant growth of productivity and cost reduction.

By allowing for experimenting with existing knowledge and combining different technologies, knowledge spillovers can result in the emergence of novel technological solutions, which has been referred to as ‘recombinant innovation’ ( [[#Weitzman--1998|Weitzman 1998]] ; [[#Fleming--2001|Fleming and Sorenson 2001]] ; [[#Olsson--2002|Olsson and Frey 2002]] ; [[#Tsur--2007|Tsur and Zemel 2007]] ; [[#Arthur--2009|Arthur 2009]] ). Recombinant innovations speed up technological change by combining different technological solutions, and make things happen that would be impossible with only incremental innovations ( [[#van%20den%20Bergh--2008|van den Bergh 2008]] ; [[#Safarzyńska--2010|Safarzyńska and van den Bergh 2010]] ; [[#Frenken--2012|Frenken et al. 2012]] ). It has been shown that 77% of all patents granted between 1790 and 2010 in the USA are coded by a combination of at least two technology codes ( [[#Youn--2015|Youn et al. 2015]] ). Spillovers related to energy and low-carbon technologies have been documented by a number of empirical studies ( ''high confidence'' ) ( [[#Popp--2002|Popp 2002]] ; [[#Verdolini--2011|Verdolini and Galeotti 2011]] ; [[#Aghion--2016|Aghion et al. 2016]] ; [[#Witajewski-Baltvilks--2017|Witajewski-Baltvilks et al. 2017]] ; [[#Conti--2018|Conti et al. 2018]] ). The presence of spillovers can have both positive and negative impacts on climate change mitigation ( ''hig'' ''h confidence'' ).

The spillover effect associated with innovation in carbon-intensive technologies may lead to lock-in of fossil-fuel technologies. Continuous technological change of carbon-intensive industry raises the bar for clean technologies: a larger drop in clean technologies’ cost is necessary to become competitive ( [[#Acemoglu--2012|Acemoglu et al. 2012]] ; [[#Aghion--2016|Aghion et al. 2016]] ). The implication is that delaying climate policy increases the cost of that policy ( [[#Aghion--2019|Aghion 2019]] ).

On the other hand, the spillover effect associated with innovation in low-emission technologies increases the potency of climate policy ( [[#Aghion--2019|Aghion 2019]] ). For instance, a policy that encourages clean innovation leads to accumulation of knowledge in clean industry which, through spillover effects, encourages further innovation in clean industries. Once the stock of knowledge is sufficiently large, the value of clean industries will be so high that technology firms will invest there, even without policy incentives. Once this point is reached, the policy intervention can be discontinued ( [[#Acemoglu--2012|Acemoglu et al. 2012]] ).

In addition, the presence of spillovers implies that a unilateral effort to reduce emissions in one region could reduce emissions in other regions ( ''medium confidence'' ) ( [[#Golombek--2004|Golombek and Hoel 2004]] ; [[#Gerlagh--2014|Gerlagh and Kuik 2014]] ). For instance, in the presence of spillovers, a carbon tax that incentivises clean technological change increases the competitiveness of clean technologies not only locally, but also abroad. The size of this effect depends on the size of the spillovers. If they are sufficiently strong, the reduction of emissions abroad due to clean technological change could be larger than the increase of emissions due to carbon leakage ( [[#Gerlagh--2014|Gerlagh and Kuik 2014]] ). Different types of carbon leakage are discussed in Chapter 13, [[IPCC:Wg3:Chapter:Chapter-13#13.7.1|Section 13.7.1]] , and other consequences of spillovers for the design of policy are discussed in Chapter 13, [[IPCC:Wg3:Chapter:Chapter-13#13.7|Section 13.7]] .3.

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