Can International Climate Cooperation Induce Knowledge Spillover to Developing Countries? Evidence from CDM

Abstract

Under the Kyoto Protocol, the Clean Development Mechanism (CDM) expects to facilitate the North-South knowledge spillovers for climate-friendly technologies. This paper examines the effect of this voluntary international climate cooperation on firm innovation and knowledge spillovers through the lens of CDM projects in China. Using a matched Difference-in-Differences (DID) approach, we find that CDM projects contribute to firms’ innovation quantity, quality, and direction in renewable energy and energy efficiency technologies. These effects are more pronounced in inducing wind, hydro, and solar energy. We explore the role of foreign sponsors in knowledge spillovers. Sponsoring firms play the technology supplier role by raising the innovation quantity and quality, while sponsoring governments perform the information intermediary role by facilitating citation flows.