Trade in Low‐Carbon Technologies: The Role of Climate and Trade Policies

Abstract

ABSTRACT Curbing carbon emissions to meet the targets set in the Paris Agreement requires the deployment of low‐carbon technologies (LCTs) at a global scale. This paper assesses the role of climate and trade policies in fostering LCT diffusion through trade. Leveraging a comprehensive database of climate policies and a new database identifying trade in LCTs and the tariffs applied to these goods, this paper shows that the introduction of new climate policies has a positive and significant impact on LCT imports. Zooming into specific climate policies, the paper finds that, except for non‐binding ones, all climate policies stimulate LCT imports. The paper also highlights the role of trade policies as an engine of LCT diffusion—reductions in tariffs applied to LCT goods have a sizable impact on LCT imports. On the flip side, results suggest that more protectionist measures would impede the spread of LCTs.