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Induced innovation in a decentralized model of climate change

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  • Jérémy Laurent-Lucchetti

    (IEA, HEC Montréal)

  • Andrew Leach

    ()
    (IEA, HEC Montréal)

Abstract

We propose a model of climate change consistent with four principal stylized facts. First, the benefits and costs of climate change mitigation policies are not evenly distributed across generations. Second, capital accumulation is not determined jointly with emissions policy, but rather as a choice made by self-interested economic agents. Third, most research and development activity in the energy sector is undertaken by private firms. Fourth, significant imperfections exist in the market for technology. The model is calibrated to match global trends in GWP, energy production, and investment in research and development, and is used for the evaluation of policies including research and development subsidies and carbon taxes.

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Bibliographic Info

Paper provided by HEC Montréal, Institut d'économie appliquée in its series Cahiers de recherche with number 06-02.

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Length: 37 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:iea:carech:0602

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Postal: Institut d'économie appliquée HEC Montréal 3000, Chemin de la Côte-Sainte-Catherine Montréal, Québec H3T 2A7
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Related research

Keywords: Alternative energy sources; climate change; technological change; research and development; induced innovation.;

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References

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  1. Gerlagh, Reyer & van der Zwaan, Bob, 2003. "Gross world product and consumption in a global warming model with endogenous technological change," Resource and Energy Economics, Elsevier, Elsevier, vol. 25(1), pages 35-57, February.
  2. David Popp, 2004. "ENTICE-BR: The Effects of Backstop Technology R&D on Climate Policy Models," NBER Working Papers 10285, National Bureau of Economic Research, Inc.
  3. Buonanno, Paolo & Carraro, Carlo & Galeotti, Marzio, 2003. "Endogenous induced technical change and the costs of Kyoto," Resource and Energy Economics, Elsevier, Elsevier, vol. 25(1), pages 11-34, February.
  4. Kocherlakota, N., 1995. "The Equity Premium: It's Still a Puzzle," Working Papers, University of Iowa, Department of Economics 95-05, University of Iowa, Department of Economics.
  5. Pizer, William A., 1999. "The optimal choice of climate change policy in the presence of uncertainty," Resource and Energy Economics, Elsevier, Elsevier, vol. 21(3-4), pages 255-287, August.
  6. Leach, Andrew J., 2009. "The welfare implications of climate change policy," Journal of Environmental Economics and Management, Elsevier, vol. 57(2), pages 151-165, March.
  7. Reyer Gerlagh, 2003. "Induced Technological Change under Technology Competition," Working Papers, Fondazione Eni Enrico Mattei 2003.5, Fondazione Eni Enrico Mattei.
  8. 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, Elsevier, vol. 54(2-3), pages 241-260, August.
  9. 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.
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Cited by:
  1. GRIMAUD André & LAFFORGUE Gilles & MAGNE Bertrand, 2007. "Economic growth and Climate change in a decentralized Economy: A Theoretical and Empirical Approach," LERNA Working Papers, LERNA, University of Toulouse 07.04.225, LERNA, University of Toulouse.
  2. Grimaud, André & Lafforgue, Gilles & Magné, Bertrand, 2008. "Decentralized Equilibrium Analysis in a Growth Model with Directed Technical Change and Climate Change Mitigation," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 537, Institut d'Économie Industrielle (IDEI), Toulouse.
  3. Grimaud, André & Lafforgue, Gilles & Magné, Bertrand, 2007. "Innovation Markets in the Policy Appraisal of Climate Change Mitigation," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 481, Institut d'Économie Industrielle (IDEI), Toulouse.

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