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The Optimal Climate Policy Portfolio when Knowledge Spills Across Sectors

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  • Emanuele Massetti

    (Fondazione Eni Enrico Mattei and Euro-Mediterranean Center for Climate Change)

  • Lea Nicita

    (Fondazione Eni Enrico Mattei)

Abstract

This paper studies the implications for climate policy of the interactions between environmental and knowledge externalities. Using a numerical analysis performed with the hybrid integrated assessment model WITCH, extended to include mutual spillovers between the energy and the non-energy sector, we show that the combination between environmental and knowledge externalities provides a strong rationale for implementing a portfolio of policies for both emissions reduction and the internalisation of knowledge externalities. Moreover, we show that implementing technology policy as a substitute for stabilisation policy is likely to increase global emissions.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2010.96.

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Date of creation: Jul 2010
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Handle: RePEc:fem:femwpa:2010.96

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Keywords: Technical Change; Climate Change; Development; Innovation; Spillovers;

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References

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  1. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc.
  2. Chang, Kuo-Ping, 1994. "Capital-energy substitution and the multi-level CES production function," Energy Economics, Elsevier, Elsevier, vol. 16(1), pages 22-26, January.
  3. Franco Malerba & Maria Luisa Mancusi & Fabio Montobbio, 2007. "Innovation, international R&D Spillovers and the sectoral heterogeneity of knowledge flows," KITeS Working Papers, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy 204, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Oct 2007.
  4. Keller, W., 1997. "Trade and the Transmission of Technology," Working papers, Wisconsin Madison - Social Systems 9620r, Wisconsin Madison - Social Systems.
  5. Edwin Mansfield, 1996. "Microeconomic policy and technological change," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 40(Jun), pages 183-213.
  6. Goulder, Lawrence H. & Schneider, Stephen H., 1999. "Induced technological change and the attractiveness of CO2 abatement policies," Resource and Energy Economics, Elsevier, Elsevier, vol. 21(3-4), pages 211-253, August.
  7. Valentina Bosetti & Carlo Carraro & Emanuele Massetti & Massimo Tavoni, 2007. "International Energy R&D Spillovers and the Economics of Greenhouse Gas Atmospheric Stabilization," Working Papers, Fondazione Eni Enrico Mattei 2007.82, Fondazione Eni Enrico Mattei.
  8. Edwin van der Werf, 2007. "Production Functions for Climate Policy Modeling: An Empirical Analysis," Kiel Working Papers 1316, Kiel Institute for the World Economy.
  9. Charles I. Jones, . "Growth: With or Without Scale Effects?," Working Papers, Stanford University, Department of Economics 99001, Stanford University, Department of Economics.
  10. Popp, David, 2004. "ENTICE: endogenous technological change in the DICE model of global warming," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 742-768, July.
  11. Lea Nicita & Carlo Carraro & Emanuele Massetti, 2009. "How Does Climate Policy Affect Technical Change? An Analysis of the Direction and Pace of Technical Progress in a Climate-Economy Model," Working Papers, Fondazione Eni Enrico Mattei 2009.8, Fondazione Eni Enrico Mattei.
  12. Valentina Bosetti, Carlo Carraro, Marzio Galeotti, Emanuele Massetti, Massimo Tavoni, 2006. "A World induced Technical Change Hybrid Model," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Special I), pages 13-38.
  13. Stavins, Robert & Jaffe, Adam & Newell, Richard, 2004. "A Tale of Two Market Failures: Technology and Environmental Policy," Discussion Papers, Resources For the Future dp-04-38, Resources For the Future.
  14. Enrica De Cian & Valentina Bosetti & Alessandra Sgobbi & Massimo Tavoni, 2009. "The 2008 WITCH Model: New Model Features and Baseline," Working Papers, Fondazione Eni Enrico Mattei 2009.85, Fondazione Eni Enrico Mattei.
  15. Robert Wieser, 2005. "Research And Development Productivity And Spillovers: Empirical Evidence At The Firm Level," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 19(4), pages 587-621, 09.
  16. David Popp & Richard G. Newell, 2009. "Where Does Energy R&D Come From? Examining Crowding Out from Environmentally-Friendly R&D," NBER Working Papers 15423, National Bureau of Economic Research, Inc.
  17. Mansfield, Edwin, et al, 1977. "Social and Private Rates of Return from Industrial Innovations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 91(2), pages 221-40, May.
  18. Gillingham, Kenneth T. & Newell, Richard G. & Pizer, William A., 2007. "Modeling Endogenous Technological Change for Climate Policy Analysis," Discussion Papers, Resources For the Future dp-07-14, Resources For the Future.
  19. Valentina Bosetti & Emanuele Massetti & Massimo Tavoni, 2007. "The WITCH Model. Structure, Baseline, Solutions," Working Papers, Fondazione Eni Enrico Mattei 2007.10, Fondazione Eni Enrico Mattei.
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Citations

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Cited by:
  1. Bretschger, Lucas & Ramer, Roger & Schwark, Florentine, 2011. "Growth effects of carbon policies: Applying a fully dynamic CGE model with heterogeneous capital," Resource and Energy Economics, Elsevier, Elsevier, vol. 33(4), pages 963-980.
  2. Lehmann, Paul, 2013. "Supplementing an emissions tax by a feed-in tariff for renewable electricity to address learning spillovers," Energy Policy, Elsevier, Elsevier, vol. 61(C), pages 635-641.

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