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Climate policies and induced technological change: Impacts and timing of technology subsidies

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Author Info
Kverndokk, Snorre () (Ragnar Frisch Centre for Economic Research,)
Rosendahl, Knut Einar () (Research Department, Statistics Norway)
Rutherford, Thomas F. () (Department of Economics, University of Colorado at Boulder,)

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Abstract

We study the role of technology subsidies in climate policies, using a simple dynamic equilibrium model with learning-by-doing. The optimal subsidy rate of a carbon-free technology is high when the technology is first adopted, but falls significantly over the next decades. However, the efficiency costs of uniform instead of optimal subsidies, may be low if there are introduction or expansion constraints for a new technology. Finally, supporting existing energy technologies only, may lead to technology lock-in, and the impacts of lock-in increase with the learning potential of new technologies as well as the possibilities for early entry and thight carbon constraints.

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File URL: http://www.oekonomi.uio.no/memo/memopdf/memo0504.pdf
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Publisher Info
Paper provided by Oslo University, Department of Economics in its series Memorandum with number 05/2004.

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Length: 34 pages
Date of creation: 29 Apr 2004
Date of revision:
Handle: RePEc:hhs:osloec:2004_005

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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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Web page: http://www.oekonomi.uio.no/indexe.html
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Related research
Keywords: Climate change policies; Computable equilibrium models; Induced technological change; Subsidies; Timing.;

Find related papers by JEL classification:
D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General
Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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References listed on IDEAS
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.:
  1. 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. [Downloadable!] (restricted)
  2. Liebowitz, S J & Margolis, Stephen E, 1995. "Path Dependence, Lock-in, and History," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(1), pages 205-26, April.
    Other versions:
  3. Marc Baudry, 2000. "Joint Management of Emission Abatement and Technological Innovation for Stock Externalities," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 16(2), pages 161-183, June. [Downloadable!] (restricted)
  4. van der Zwaan, B. C. C. & Gerlagh, R. & G. & Klaassen & Schrattenholzer, L., 2002. "Endogenous technological change in climate change modelling," Energy Economics, Elsevier, vol. 24(1), pages 1-19, January. [Downloadable!] (restricted)
  5. Stephen Redding, 2002. "Path Dependence, Endogenous Innovation, and Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1215-1248, November. [Downloadable!] (restricted)
    Other versions:
  6. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May. [Downloadable!] (restricted)
  7. Grubler, Arnulf & Messner, Sabine, 1998. "Technological change and the timing of mitigation measures," Energy Economics, Elsevier, vol. 20(5-6), pages 495-512, December. [Downloadable!] (restricted)
  8. Adam Jaffe & Richard Newell & Robert Stavins, 2002. "Environmental Policy and Technological Change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(1), pages 41-70, June. [Downloadable!] (restricted)
  9. Kverndokk,S. & Rosendahl,K.E. & Rutherford,T.F., 2001. "Climate policies and induced technological change : which to choose the carrot or the stick?," Memorandum 26/2001, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
  10. Lau, Morten I. & Pahlke, Andreas & Rutherford, Thomas F., 2002. "Approximating infinite-horizon models in a complementarity format: A primer in dynamic general equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 26(4), pages 577-609, April. [Downloadable!] (restricted)
  11. 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. [Downloadable!] (restricted)
  12. Hoel, Michael, 1978. "Resource Extraction when a Future Substitute Has an Uncertain Cost," Review of Economic Studies, Blackwell Publishing, vol. 45(3), pages 637-44, October. [Downloadable!] (restricted)
  13. 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. [Downloadable!] (restricted)
  14. Grubler, Arnulf & Nakicenovic, Nebojsa & Victor, David G., 1999. "Dynamics of energy technologies and global change," Energy Policy, Elsevier, vol. 27(5), pages 247-280, May. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Finn Roar Aune, Snorre Kverndokk, Lars Lindholt and Knut Einar Rosendahl, 2005. "Profitability of different instruments in international climate policies," Discussion Papers 403, Research Department of Statistics Norway. [Downloadable!]
  2. Enrica De Cian, 2006. "International Technology Spillovers in Climate-Economy Models: Two Possible Approaches," Working Papers 2006.141, Fondazione Eni Enrico Mattei. [Downloadable!]
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