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Innovation Benefits from Nuclear Phase-out: Can they Compensate the Costs?

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  • Enrica De Cian

    (Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC))

  • Samuel Carrara

    (Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC))

  • Massimo Tavoni

    (Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC))

Abstract

This paper investigates whether an inefficient allocation of abatement, due to constraints on the use of currently available low carbon mitigation options, can promote innovation in new technologies and eventually generate welfare gains. We focus on the case of nuclear power phase out, when accounting for endogenous technical change in energy efficiency and in low carbon technologies. The analysis uses the Integrated Assessment Model WITCH, which features multiple externalities due to both climate and innovation market failures. Our results show that phasing out nuclear power stimulates additional R&D investments and deployment of infant technologies with large learning potential. The innovation benefits which this would generate and that would not otherwise be captured due to intertemporal and international externalities almost completely offset the economic costs of phasing out nuclear power. The technological change benefit depends on the stringency of the climate policy and is distributed unevenly across countries.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2012.96.

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Date of creation: Dec 2012
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Handle: RePEc:fem:femwpa:2012.96

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Keywords: Technological change; Climate policy; Nuclear phase-out;

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  1. Bramoulle, Yann & Olson, Lars J., 2005. "Allocation of pollution abatement under learning by doing," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1935-1960, September.
  2. Rosendahl, Knut Einar, 2004. "Cost-effective environmental policy: implications of induced technological change," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1099-1121, November.
  3. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  4. Steinke, Florian & Wolfrum, Philipp & Hoffmann, Clemens, 2013. "Grid vs. storage in a 100% renewable Europe," Renewable Energy, Elsevier, vol. 50(C), pages 826-832.
  5. Badcock, Jeremy & Lenzen, Manfred, 2010. "Subsidies for electricity-generating technologies: A review," Energy Policy, Elsevier, vol. 38(9), pages 5038-5047, September.
  6. Goulder, Lawrence H. & Schneider, Stephen H., 1999. "Induced technological change and the attractiveness of CO2 abatement policies," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 211-253, August.
  7. Delucchi, Mark A. & Jacobson, Mark Z., 2011. "Providing all global energy with wind, water, and solar power, Part II: Reliability, system and transmission costs, and policies," Energy Policy, Elsevier, vol. 39(3), pages 1170-1190, March.
  8. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
  9. Otto, Vincent M. & Löschel, Andreas & Reilly, John, 2008. "Directed technical change and differentiation of climate policy," Energy Economics, Elsevier, vol. 30(6), pages 2855-2878, November.
  10. Enrica Cian & Valentina Bosetti & Massimo Tavoni, 2012. "Technology innovation and diffusion in “less than ideal” climate policies: An assessment with the WITCH model," Climatic Change, Springer, vol. 114(1), pages 121-143, September.
  11. Kahouli-Brahmi, Sondes, 2008. "Technological learning in energy-environment-economy modelling: A survey," Energy Policy, Elsevier, vol. 36(1), pages 138-162, January.
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