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Abatement, R&D and growth with a pollution ceiling

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  • Kollenbach, Gilbert

Abstract

The consequences of the 2°C climate target and the implicitly imposed ceiling on CO2 have been analyzed in several studies. We use an endogenous growth model with a ceiling and an abatement option to study the effect of the ceiling on the allocation of limited funds for R&D, abatement and capital accumulation. It is found that the advantagenousness of abatement rises with the cost advantage of fossil fuel versus backstop. If the cost advantage is sufficiently large at some point in time it outweighs the costs of abatement and the gains of R&D and capital accumulation. The reallocation of production towards abatement may cause an increase or decrease in long-run consumption. In the latter case, abatement allows an intertemporal consumption trade-off which may even justify the disregard of everlasting growth. In case of stock dependent fossil fuel costs, an abatement induced speed-up of technology development may cause an increase in fossil fuel stock left in situ.

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  • Kollenbach, Gilbert, 2015. "Abatement, R&D and growth with a pollution ceiling," Journal of Economic Dynamics and Control, Elsevier, vol. 54(C), pages 1-16.
    • Handle: RePEc:eee:dyncon:v:54:y:2015:i:c:p:1-16
    DOI: 10.1016/j.jedc.2015.02.014
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    Cited by:

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    2. Durmaz, Tunç, 2018. "The economics of CCS: Why have CCS technologies not had an international breakthrough?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 95(C), pages 328-340.
    3. Kollenbach, Gilbert, 2017. "Unilateral climate Policy and the Green Paradox: Extraction Costs matter," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168245, Verein für Socialpolitik / German Economic Association.
    4. Tunç Durmaz & Fred Schroyen, 2020. "Evaluating Carbon Capture And Storage In A Climate Model With Endogenous Technical Change," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 1-47, February.
    5. Ronald R. Kumar & Peter J. Stauvermann, 2019. "The Effects of a Revenue-Neutral Child Subsidy Tax Mechanism on Growth and GHG Emissions," Sustainability, MDPI, vol. 11(9), pages 1-23, May.
    6. Stijepic, Denis, 2017. "On the system-theoretical foundations of non-economic parameter constancy assumptions in economic growth modeling," MPRA Paper 82699, University Library of Munich, Germany.
    7. Thomas Eichner & Gilbert Kollenbach & Mark Schopf, 2023. "Demand- Versus Supply-Side Climate Policies with a Carbon Dioxide Ceiling," The Economic Journal, Royal Economic Society, vol. 133(652), pages 1371-1406.

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    More about this item

    Keywords

    Climate change; Research and development; Abatement; Endogenous growth; Fossil fuel; Renewable resource;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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