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Linking Environmental and Innovation Policy

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Author Info

  • Gerlagh , Reyer

    (University of Manchester)

  • Kverndokk, Snorre

    (Ragnar Frisch Centre for Economic Research)

  • Rosendahl, Knut Einar

    (Research Department, Statistics Norway)

Abstract

This paper addresses the timing and interdependence between innovation and environmental policy in a model of research and development (R&D). On a first-best path the environmental tax is set at the Pigouvian level, independent of innovation policy. With infinite patent lifetime, the R&D subsidy should be constant and independent of the state of the environment. However, with finite patent lifetime, optimal innovation policy depends on the stage of the environmental problem. In the early stages of an environmental problem, abatement research should be subsidized at a high level and this subsidy should fall monotonically over time to stimulate initial R&D investments. Alternatively, with a constant R&D subsidy, patents’ length should initially have a very long life-time but this should be gradually shortened. In a second-best situation with no deployment subsidy for abatement equipment, we find that the environmental tax should be high compared to the Pigouvian levels when an abatement industry is developing, but the relative difference falls over time. That is, environmental policies will be accelerated compared to first-best.

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Bibliographic Info

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 10/2008.

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Length: 27 pages
Date of creation: 10 Jun 2008
Date of revision:
Handle: RePEc:hhs:osloec:2008_010

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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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Keywords: Environmental policy; research and development; innovation studies; patents;

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References

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  1. Gerlagh, Reyer & Lise, Wietze, 2005. "Carbon taxes: A drop in the ocean, or a drop that erodes the stone? The effect of carbon taxes on technological change," Ecological Economics, Elsevier, vol. 54(2-3), pages 241-260, August.
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Citations

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Cited by:
  1. GRIMAUD Andre & LAFFORGUE Gilles & MAGNE Bertrand, 2009. "Climate change mitigation options and directed technical change: A decentralized equilibrium analysis," LERNA Working Papers 09.20.296, LERNA, University of Toulouse.
  2. Grimaud, André & Rougé, Luc, 2012. "Carbon Sequestration, Economic Policies and Growth," TSE Working Papers 12-349, Toulouse School of Economics (TSE), revised Aug 2013.
  3. Gerlagh, R. & Kverndokk, S. & Rosendahl, K.E., 2009. "Optimal timing of climate change policy: Interaction between carbon taxes and innovation externalities," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3777015, Tilburg University.
  4. GRIMAUD André & LAFFORGUE Gilles, 2008. "Climate change mitigation policies: Are R&D subsidies preferable to a carbon tax?," LERNA Working Papers 08.31.275, LERNA, University of Toulouse.
  5. Chu, Hsun & Lai, Ching-Chong, 2013. "Abatement R&D, Market Imperfections, and Environmental Policy in an Endogenous Growth Model," MPRA Paper 52869, University Library of Munich, Germany, revised Nov 2013.
  6. Mads Greaker & Lise-Lotte Pade, 2008. "Optimal CO2 abatement and technological change. Should emission taxes start high in order to spur R&D?," Discussion Papers 548, Research Department of Statistics Norway.
  7. Commission of Experts for Research and Innovation (EFI), Berlin (ed.), 2013. "Research, innovation and technological performance in Germany - EFI Report 2013," Research, innovation and technological performance in Germany: Report, Expertenkommission Forschung und Innovation (EFI), volume 127, number 2013e, November.
  8. Grimaud, André & Magné, Bertrand & Rougé, Luc, 2009. "Polluting Non-Renewable Resources, Carbon Abatement and Climate Policy in a Romer Growth Model," IDEI Working Papers 548, Institut d'Économie Industrielle (IDEI), Toulouse.
  9. Matthias Kalkuhl & Ottmar Edenhofer & Kai Lessmann, 2011. "Learning or Lock-in: Optimal Technology Policies to Support Mitigation," CESifo Working Paper Series 3422, CESifo Group Munich.
  10. Brita Bye & Karl Jacobsen, 2009. "On general versus emission saving R&D support," Discussion Papers 584, Research Department of Statistics Norway.
  11. Tom-Reiel Heggedal & Karl Jacobsen, 2008. "Timing of innovation policies when carbon emissions are restricted: an applied general equilibrium analysis," Discussion Papers 536, Research Department of Statistics Norway.

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