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Induced Technological Change Under Carbon Taxes

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  • Reyer Gerlagh

    (Institute for Environmental Studies, Faculty of Earth and Life Sciences, Vrije Universiteit, Amsterdam, the Netherlands)

  • Wietze Lise

    (Institute for Environmental Studies, Faculty of Earth and Life Sciences, Vrije Universiteit, Amsterdam, the Netherlands)

Abstract

We develop an economic partial equilibrium model for energy supply and demand with capital and labor as production factors, and endogenous technological change through learning by research and learning by doing. Our model reproduces the learning curve typical for (bottom-up) energy system models. The model also produces an endogenous S-curved transition from fossil fuel energy sources to carbon-free energy sources over the coming two centuries. We use the model to study changes in fossil fuel and carbon-free energy use and carbon dioxide emissions induced by carbon taxes. It is shown that induced technological change accelerates the substitution of carbon-free energy for fossil fuels substantially, and can increase by factor 5 the cumulative emission reductions achieved through a carbon tax over the period 2000-2100.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2003.84.

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Date of creation: Sep 2003
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Handle: RePEc:fem:femwpa:2003.84

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Related research

Keywords: Induced technological change; Environmental taxes; Partial equilibrium; Learning by doing;

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Cited by:
  1. Michel Moreaux & Francesco Ricci, 2005. "The simple analytics of developing resources from resources," Working Papers 24242, Institut National de la Recherche Agronomique, France.
  2. Gillingham, Kenneth & Newell, Richard G. & Pizer, William A., 2008. "Modeling endogenous technological change for climate policy analysis," Energy Economics, Elsevier, vol. 30(6), pages 2734-2753, November.
  3. Vincent M. Otto & Andreas Löschel & Rob Dellink, 2005. "Energy Biased Technical Change: A CGE Analysis," Working Papers 2005.90, Fondazione Eni Enrico Mattei.
  4. Valentina Bosetti & Carlo Carraro & Marzio Galeotti, 2006. "Stabilisation Targets, Technical Change and the Macroeconomic Costs of Climate Change Control," Working Papers 2006.2, Fondazione Eni Enrico Mattei.
  5. Marzio Galeotti & Carlo Carraro, 2004. "Does Endogenous Technical Change Make a Difference in Climate Policy Analysis? A Robustness Exercise with the FEEM-RICE Model," Working Papers 2004.152, Fondazione Eni Enrico Mattei.
  6. Gerlagh, Reyer, 2008. "A climate-change policy induced shift from innovations in carbon-energy production to carbon-energy savings," Energy Economics, Elsevier, vol. 30(2), pages 425-448, March.
  7. Reyer Gerlagh, 2004. "A Climate-Change Policy Induced Shift from Innovations in Energy Production to Energy Savings," Working Papers 2004.128, Fondazione Eni Enrico Mattei.
  8. Zon,Adriaan,van & Lontzek,Thomas, 2005. "A ‘putty-practically-clay’ vintage model with R&D driven biases in energy-saving technical change," Research Memorandum 006, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  9. David Popp, 2004. "ENTICE-BR: The Effects of Backstop Technology R&D on Climate Policy Models," NBER Working Papers 10285, National Bureau of Economic Research, Inc.

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