On Backstops and Boomerangs: Environmental R&D under Technological Uncertainty
AbstractThe literature on environmental R&D frequently studies innovation as a two-stage process, with a single R&D event leading from a conventional polluting technology to a perfectly clean backstop. We allow for uncertainty in innovation in that the new technology may turn out to generate a new pollution problem. R&D may therefore be optimally undertaken more than once. Using and externding recent results from multi-stage optimal control theory, we provide a full characterization of the optimal pollution and R&D policies. The optimal R&D program is strictly sequential and has an endogenous stopping point. Uncertainty drives total R&D effort and its timing.
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Bibliographic InfoPaper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0437.
Length: 40 pages
Date of creation: Jan 2007
Date of revision: Jan 2007
stock pollution; backstop technology; multi-stage optimal control; pollution thresholds; uncertainty;
Other versions of this item:
- Goeschl, Timo & Perino, Grischa, 2009. "On backstops and boomerangs: Environmental R&D under technological uncertainty," Energy Economics, Elsevier, vol. 31(5), pages 800-809, September.
- Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
- Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-31 (All new papers)
- NEP-ENE-2007-03-31 (Energy Economics)
- NEP-ENV-2007-03-31 (Environmental Economics)
- NEP-INO-2007-03-31 (Innovation)
- NEP-IPR-2007-03-31 (Intellectual Property Rights)
- NEP-MIC-2007-03-31 (Microeconomics)
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