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Cost-effective environmental policy: Implications of induced technological change

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Author Info
Knut Einar Rosendahl () (Statistics Norway)
Abstract

Cost-effective environmental policy generally requires that all emission sources are faced with the same tax. In this paper I discuss how the existence of induced technological change may alter this result, if at least some of the effect is external to the firm. Focusing on learning by doing effects in abatement activities, it is shown that emission sources with external learning effects should be faced with a higher tax than emission sources with only autonomous technological change. By using simple numerical simulations, it is further investigated to what degree a cost-effective climate policy differs from a free quota market, under various assumptions about learning effects, diffusion of technology and environmental targets. The results indicate that optimal taxes may be significantly higher in the industrial world than in the developing world. Moreover, the industrial world's share of global abatement may be much higher in a cost-effective solution than in a free quota market. The global cost savings of a fully flexible implementation of the Kyoto Protocol are further questioned, as potential spillover effects of technological growth in the industrial world are not internalised in the market.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 314.

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Date of creation: Jan 2002
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Handle: RePEc:ssb:dispap:314

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Related research
Keywords: Induced technological change; Learning effects; Climate policy; Cost-effectiveness;

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Find related papers by JEL classification:
Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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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.:
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  3. 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)
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  12. 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)
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  15. Dowlatabadi, Hadi, 1998. "Sensitivity of climate change mitigation estimates to assumptions about technical change," Energy Economics, Elsevier, vol. 20(5-6), pages 473-493, December. [Downloadable!] (restricted)
  16. 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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(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. Golombek, Rolf & Hoel, Michael, 2004. "Climate Agreements and Technology Policy," Memorandum 11/2004, Oslo University, Department of Economics. [Downloadable!]
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  2. Golombek, Rolf & Hoel, Michael, 2004. "Unilateral emission reductions when there are cross -country technology spillovers," Memorandum 17/2004, Oslo University, Department of Economics. [Downloadable!]
  3. Rolf Golombek & Michael Hoel, 2005. "Climate Policy under Technology Spillovers," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(2), pages 201-227, 06. [Downloadable!] (restricted)
    Other versions:
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