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Climate Change Mitigation Options and Directed Technical Change: A Decentralized Equilibrium Analysis

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  • André Grimaud
  • Gilles Lafforgue
  • Bertrand Magné

Abstract

The paper considers a climate change growth model with three R&D sectors dedicated to energy, backstop and CCS (Carbon Capture and Storage) efficiency. First, we characterize the set of decentralized equilibria: A particular equilibrium is associated to each vector of public tools which includes a carbon tax and a subsidy to each R&D sector. Moreover, we show that it is possible to compute any equilibrium as the solution of a maximization program. Second, we solve the first-best optimum problem and we implement it by computing the vector of optimal tools. Finally, we illustrate the theoretical model using some calibrated functional specifications. In particular, we investigate the effects of various combinations of public policies (including the optimal ones) by determining the deviation of each corresponding equilibrium from the "laisser-faire" benchmark.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2875.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2875

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Keywords: climate change; energy; CCS; directed technical change; carbon tax; R&D subsidies;

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