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Climate Policies and Economic Growth

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Author Info
Kari Alho
Abstract

ABSTRACT : A Climate Agreement, like the one reached in Kyoto in 1997, on reducing greenhouse gas emissions may have important effects on the global and the national economies. The aim of this paper is to make some basic numerical evaluations of the economic effects of climate policies, imposing a ceiling on the use of energy input in production in a single economy. First, we make an evaluation under immobile and internationally mobile domestic factors of production, and infer how much international factor mobility, so-called carbon leakage, can magnify the adverse effects. Next, we introduce optimal endogenous growth, so that environmental policies can potentially lead to the introduction of less-polluting energy technologies. The general conclusion of this is that induced R&D in less-polluting energy technologies is likely to reduce the economic burden of climate policies only marginally. Under an internationally tradable emissions permit scheme, however, the endogenous technical change reacts quite vigorously to the price of the pollution right. Finally, we solve for the optimal subsidy to R&D in clean energy technology in a market economy, and find it to be quite sizeable.

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Paper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 1024.

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Length: 23 pages
Date of creation: 09 Jun 2006
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Handle: RePEc:rif:dpaper:1024

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Related research
Keywords: climate policies economic growth R&D

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Find related papers by JEL classification:
Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

This paper has been announced in the following NEP Reports:

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. Mika Pajarinen & Pekka Ylä-Anttila, 2006. "Omistajuus ja yritysten menestyminen: analyysia suomalaisella aineistolla," Discussion Papers 1007, The Research Institute of the Finnish Economy. [Downloadable!]
  2. Sergey Sutyrin & Vladimir Sherov, 2005. "Russian Regions and Their Foreign Trade," Discussion Papers 995, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Ville Kaitila & Maarit Lindström & Ewa Balcerowicz, 2005. "Puolan liiketoimintaympäristö ja suomalaisten yritysten kokemukset," Discussion Papers 994, The Research Institute of the Finnish Economy. [Downloadable!]
  4. Ari Hyytinen & Mika Maliranta, 2006. "When Do Employees Leave Their Job for Entrepreneurship: Evidence from Linked Employer-Employee Data," Discussion Papers 1023, The Research Institute of the Finnish Economy. [Downloadable!]
  5. Christopher Palmberg & Tuomo Nikulainen, 2006. "Industrial Renewal and Growth through Nanotechnology ? - An Overview with Focus on Finland," Discussion Papers 1020, The Research Institute of the Finnish Economy. [Downloadable!]
  6. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August. [Downloadable!] (restricted)
  7. Christopher Palmberg & Mika Pajarinen, 2005. "Alliance Capitalism and the Internationalisation of Finnish Firms," Discussion Papers 991, The Research Institute of the Finnish Economy. [Downloadable!]
  8. Laura Valkonen, 2006. "Deregulation as a Means to Increase Competition and Productivity," Discussion Papers 1014, The Research Institute of the Finnish Economy. [Downloadable!]
  9. Mika Maliranta & Pekka Ilmakunnas, 2005. "Decomposing productivity and wage effects of intra-establishment labor restructuring," Discussion Papers 993, The Research Institute of the Finnish Economy. [Downloadable!]
    Other versions:
  10. Arto Seppä, 2006. "Open Source in Finnish Software Companies," Discussion Papers 1002, The Research Institute of the Finnish Economy. [Downloadable!]
  11. Francesco Daveri & Mika Maliranta, 2006. "Age, Technology and Labour Costs," Discussion Papers 1010, The Research Institute of the Finnish Economy. [Downloadable!]
    Other versions:
  12. Esa Viitamo, 2006. "Markkinoiden toimivuuden arvioiminen - Suuntaviivoja vertailevalle kilpailututkimukselle," Discussion Papers 1021, The Research Institute of the Finnish Economy. [Downloadable!]
  13. Hannu Hernesniemi & Martti Kulvik, 2006. "Helsingin seudun klusterit sekä erikoistuminen bioteknologiaan ja logistiikkaan," Discussion Papers 1013, The Research Institute of the Finnish Economy. [Downloadable!]
  14. Olavi Rantala, 2006. "Sosiaalietuuksien rahoituksen hinta- ja hyvinvointivaikutukset kotitaloussektorissa," Discussion Papers 1016, The Research Institute of the Finnish Economy. [Downloadable!]
  15. van Zon, Adriaan & Yetkiner, I. Hakan, 2003. "An endogenous growth model with embodied energy-saving technical change," Resource and Energy Economics, Elsevier, vol. 25(1), pages 81-103, February. [Downloadable!] (restricted)
  16. Heli Koski & Tobias Kretschmer, 2006. "Innovation and Dominant Design in Mobile Telephone," Discussion Papers 1012, The Research Institute of the Finnish Economy. [Downloadable!]
    Other versions:
  17. Ville Kaitila, 2006. "Productivity, Hours Worked, and Tax/Benefit Systems in Europe and Beyond," Discussion Papers 1015, The Research Institute of the Finnish Economy. [Downloadable!]
  18. Juha Alho & Niku Määttänen, 2006. "Aggregate Mortality Risk and the Insurance Value of Annuities," Discussion Papers 1005, The Research Institute of the Finnish Economy. [Downloadable!]
  19. Morris Teubal & Terttu Luukkonen, 2006. "Venture Capital Industries and Policies: Some Cross-Country Comparisons," Discussion Papers 1006, The Research Institute of the Finnish Economy. [Downloadable!]
  20. Smulders, Sjak & de Nooij, Michiel, 2003. "The impact of energy conservation on technology and economic growth," Resource and Energy Economics, Elsevier, vol. 25(1), pages 59-79, February. [Downloadable!] (restricted)
  21. Elias Oikarinen, 2005. "Is Housing Overvalued in the Helsinki Metropolitan Area?," Discussion Papers 992, The Research Institute of the Finnish Economy. [Downloadable!]
  22. Maarit Lindström & Mika Pajarinen, 2006. "The Use of Design in Finnish Manufacturing Firms," Discussion Papers 1017, The Research Institute of the Finnish Economy. [Downloadable!]
  23. Eicher, Theo S & Turnovsky, Stephen J, 1999. "Non-scale Models of Economic Growth," Economic Journal, Royal Economic Society, vol. 109(457), pages 394-415, July. [Downloadable!] (restricted)
  24. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
    Other versions:
  25. Terttu Luukkonen, 2006. "Venture Capital Industry in Finland - Country Report for the Venture Fun Project," Discussion Papers 1003, The Research Institute of the Finnish Economy. [Downloadable!]
Full references

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. Tuomo Nikulainen & Raine Hermans & Martti Kulvik, 2006. "Patent citations indicating present value of the biotechnology business," Discussion Papers 1048, The Research Institute of the Finnish Economy. [Downloadable!]
  2. Elad Harison & Heli Koski, 2006. "Innovative Software Business Strategies: Evidence from Finnish Firms," Discussion Papers 1042, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Mikko Ketokivi, 2006. "When Does Co-location of Manufacturing and R&D Matter?," Discussion Papers 1051, The Research Institute of the Finnish Economy. [Downloadable!]
  4. Jyrki Ali-Yrkkö, 2006. "Technology Sourcing Through Acquisitions – Do High Quality Patents Attract Acquires?," Discussion Papers 1025, The Research Institute of the Finnish Economy. [Downloadable!]
  5. Alberto Di Minin & Christopher Palmberg, 2006. "A case for non-globalization? The organisation of r&d in the wireless telecommunications industry," Discussion Papers 1047, The Research Institute of the Finnish Economy. [Downloadable!]
  6. Jyrki Ali-Yrkkö & Mika Maliranta, 2006. "Impact of R&D on Productivity - Firm-level Evidence from Finland," Discussion Papers 1031, The Research Institute of the Finnish Economy. [Downloadable!]
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