What is the growth potential of green innovation? An assessment of EU climate policy options
AbstractThis paper provides a model-based analysis of the cost-efficiency of different EU climate policy options that could direct innovation in the private sector towards an environmentally sustainable growth path. Our objective is to assess different policy options in order to identify an appropriate policy-mix of environmental and innovation market instruments in terms of their cost-effectiveness. For this purpose, we develop a fully-dynamic, multisectoral DSGE model with endogenous technological change where we specifically identify its environmental content and we calibrate the model for the EU and the rest of the world. Our results suggest that an appropriate policy mix should intensively stimulate R&D in the green sectors in the short-run and phase-it out by spreading the R&D support to all sectors of the economy in the medium-term. Although intuitive, the orders of magnitude presented in this paper should be interpreted with caution by taking into account the underlying assumptions of the model and identification of green innovation data.
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Bibliographic InfoPaper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 413.
Length: 43 pages
Date of creation: Jun 2010
Date of revision:
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Carbon revenue recycling; climate change; directed technical change; double dividend; dynamic general equilibrium model; endogenous growth; R&D;
Find related papers by JEL classification:
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-03 (All new papers)
- NEP-CMP-2010-07-03 (Computational Economics)
- NEP-ENE-2010-07-03 (Energy Economics)
- NEP-ENV-2010-07-03 (Environmental Economics)
- NEP-EUR-2010-07-03 (Microeconomic European Issues)
- NEP-INO-2010-07-03 (Innovation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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