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How Does Climate Policy Affect Technical Change? An Analysis of the Direction and Pace of Technical Progress in a Climate-Economy Model

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  • Carlo Carraro, Emanuele Massetti, Lea Nicita

Abstract

This paper analyses whether and how a climate policy designed to stabilize greenhouse gases in the atmosphere is likely to change the direction and pace of technical progress. The analysis is performed using an upgraded version of WITCH, a dynamic integrated regional model of the world economy. In this version, a non-energy R&D Sector, which enhances the productivity of the capital-labor aggregate, has been added to the energy R&D sector included in the original WITCH model. We find that, as a consequence of climate policy, R&D is re-directed towards energy knowledge. Nonetheless, total R&D investments decrease, due to a more than proportional contraction of non-energy R&D. Indeed, when non-energy and energy inputs are weakly substitutable, the overall contraction of the economic activity associated with a climate policy induces a decline in total R&D investments. However, enhanced investments in energy R&D and in the energy sector are found not to “crowd-out” investments in non-energy R&D.

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 30 (2009)
Issue (Month): Special Issue #2 ()
Pages:

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Handle: RePEc:aen:journl:2009se-climate-change-a02

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Cited by:
  1. Emanuele Massetti & Lea Nicita, 2010. "The Optimal Climate Policy Portfolio when Knowledge Spills Across Sectors," Working Papers 2010.96, Fondazione Eni Enrico Mattei.
  2. Joshua S. Gans, 2012. "Innovation and Climate Change Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 4(4), pages 125-45, November.
  3. Everett, Tim & Ishwaran, Mallika & Ansaloni, Gian Paolo & Rubin, Alex, 2010. "Economic growth and the environment," MPRA Paper 23585, University Library of Munich, Germany.

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