How Does Climate Policy Affect Technical Change? An Analysis of the Direction and Pace of Technical Progress in a Climate-Economy Model
AbstractThis paper analyses whether and how a climate policy designed to stabilize greenhouse gases in the atmosphere is likely to change the direction and pace of technical progress. The analysis is performed using an upgraded version of WITCH, a dynamic integrated regional model of the world economy. In this version, a non-energy R&D Sector, which enhances the productivity of the capital-labor aggregate, has been added to the energy R&D sector included in the original WITCH model. We find that, as a consequence of climate policy, R&D is re-directed towards energy knowledge. Nonetheless, total R&D investments decrease, due to a more than proportional contraction of non-energy R&D. Indeed, when non-energy and energy inputs are weakly substitutable, the overall contraction of the economic activity associated with a climate policy induces a decline in total R&D investments. However, enhanced investments in energy R&D and in the energy sector are found not to “crowd-out” investments in non-energy R&D.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2009.8.
Date of creation: Jan 2009
Date of revision:
echnical Change; Climate Policy; Stabilization Cost; R&D Investments;
Other versions of this item:
- Carlo Carraro, Emanuele Massetti, Lea Nicita, 2009. "How Does Climate Policy Affect Technical Change? An Analysis of the Direction and Pace of Technical Progress in a Climate-Economy Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-23 (All new papers)
- NEP-ENE-2009-05-23 (Energy Economics)
- NEP-ENV-2009-05-23 (Environmental Economics)
- NEP-MIC-2009-05-23 (Microeconomics)
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- Joshua S. Gans, 2012. "Innovation and Climate Change Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 4(4), pages 125-45, November.
- Everett, Tim & Ishwaran, Mallika & Ansaloni, Gian Paolo & Rubin, Alex, 2010. "Economic growth and the environment," MPRA Paper 23585, University Library of Munich, Germany.
- Emanuele Massetti & Lea Nicita, 2010.
"The Optimal Climate Policy Portfolio when Knowledge Spills Across Sectors,"
2010.96, Fondazione Eni Enrico Mattei.
- Emanuele Massetti & Lea Nicita, 2010. "The Optimal Climate Policy Portfolio when Knowledge Spills across Sectors," CESifo Working Paper Series 2988, CESifo Group Munich.
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