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Optimal CO2-abatement with socio-economic inertia and induced technological change

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  • Malte Schwoon
  • Richard S.J. Tol

    ()
    (Economic and Social Research Institute, Dublin)

Abstract

The impact of induced technological change (ITC) in energy/climate models on the timing of optimal CO2-abatement depends on whether R&D or learning-by-doing (LBD) is the driving force. Bottom-up energy system models employing LBD suggest strong increases in optimal early abatement. In this paper we extend an existing top-down model supporting this view according to the notion that socio-economic inertia interferes with rapid technological change. We derive analytical results concerning the impact of inertia and ITC on optimal initial abatement and show a wide range of numerical simulations to illustrate magnitudes. Inertia now dominates the timing decision on early abatement, such that LBD might even have a negative effect on early abatement and the impact of R&D is limited. However, ITC still reduces costs of stabilizing atmospheric CO2-concentrations considerably.

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File URL: http://www.fnu.zmaw.de/fileadmin/fnu-files/publication/working-papers/WP-FNU-37schwoon_tol.pdf
File Function: First version, 2004
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Bibliographic Info

Paper provided by Research unit Sustainability and Global Change, Hamburg University in its series Working Papers with number FNU-37.

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Length: 54 pages
Date of creation: Jan 2004
Date of revision: Jan 2004
Publication status: Published, Energy Journal, 27 (4), 25-60
Handle: RePEc:sgc:wpaper:37

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Keywords: climate policy; technological change; inertia;

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References

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  3. Rasmussen, Tobias N., 2001. "CO2 abatement policy with learning-by-doing in renewable energy," Resource and Energy Economics, Elsevier, vol. 23(4), pages 297-325, October.
  4. Toman, Michael & Shogren, Jason, 2000. "Climate Change Policy," Discussion Papers dp-00-22, Resources For the Future.
  5. Pindyck, Robert S., 2000. "Irreversibilities and the timing of environmental policy," Resource and Energy Economics, Elsevier, vol. 22(3), pages 233-259, July.
  6. Franck Lecocq & Jean-Charles Hourcade & Minh Ha-Duong, 1998. "Decision making under uncertainty and inertia constraints: sectoral implications of the when flexibility," Post-Print halshs-00002458, HAL.
  7. 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.
  8. Manne, Alan S. & Barreto, Leonardo, 2004. "Learn-by-doing and carbon dioxide abatement," Energy Economics, Elsevier, vol. 26(4), pages 621-633, July.
  9. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
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  14. Loschel, Andreas, 2002. "Technological change in economic models of environmental policy: a survey," Ecological Economics, Elsevier, vol. 43(2-3), pages 105-126, December.
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  18. 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.
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Citations

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Cited by:
  1. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.
  2. David Popp & Nidhi Santen & Karen Fisher-Vanden & Mort Webster, 2012. "Technology Variation vs. R&D Uncertainty: What Matters Most for Energy Patent Success?," NBER Working Papers 17792, National Bureau of Economic Research, Inc.
  3. Adrien Vogt-Schilb & Guy Meunier & Stéphane Hallegatte, 2012. "How inertia and limited potentials affect the timing of sectoral abatements in optimal climate policy," Post-Print hal-00722574, HAL.
  4. David Popp & Richard G. Newell & Adam B. Jaffe, 2009. "Energy, the Environment, and Technological Change," NBER Working Papers 14832, National Bureau of Economic Research, Inc.
  5. repec:hal:wpaper:hal-00916328 is not listed on IDEAS
  6. William A. Pizer & David Popp, 2007. "Endogenizing Technological Change: Matching Empirical Evidence to Modeling Needs," NBER Working Papers 13053, National Bureau of Economic Research, Inc.
  7. Adrien Vogt-Schilb & Stéphane Hallegatte, 2013. "Marginal Abatement Cost Curves and the Optimal Timing of Mitigation Measures," Working Papers 2013.89, Fondazione Eni Enrico Mattei.
  8. Popp, David & Santen, Nidhi & Fisher-Vanden, Karen & Webster, Mort, 2013. "Technology variation vs. R&D uncertainty: What matters most for energy patent success?," Resource and Energy Economics, Elsevier, vol. 35(4), pages 505-533.
  9. repec:hal:ciredw:hal-00916328 is not listed on IDEAS

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