IDEAS home Printed from https://ideas.repec.org/p/ssb/dispap/768.html
   My bibliography  Save this paper

Diffusion of climate technologies in the presence of commitment problems

Author

Listed:

Abstract

Publicly announced GHG mitigation targets and emissions pricing strategies by individual governments may suffer from inherent commitment problems. When emission prices are perceived as short-lived, socially cost-effective upfront investment in climate technologies may be hampered. This paper compares the social abatement cost of a uniform GHG pricing system with two policy options for overcoming such regulatory uncertainty: one with a state guarantee scheme whereby the regulatory risk is borne by the government and one which combines emissions pricing with subsidies for upfront climate technology investments. A technology-rich CGE model is applied that accounts for abatement both within and beyond existing technologies. Our findings suggest a tripling of abatement costs if domestic climate policies fail to stimulate investment in new technological solutions. Since the cost of funding investment subsidies is found to be small, the subsidy scheme performs almost as well as the guarantee scheme.

Suggested Citation

  • Taran Fæhn & Elisabeth Thuestad Isaksen, 2014. "Diffusion of climate technologies in the presence of commitment problems," Discussion Papers 768, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:768
    as

    Download full text from publisher

    File URL: https://www.ssb.no/en/forskning/discussion-papers/_attachment/160190
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Montero, Juan Pablo, 2011. "A note on environmental policy and innovation when governments cannot commit," Energy Economics, Elsevier, vol. 33(S1), pages 13-19.
    2. Valentina Bosetti & Carlo Carraro & Marzio Galeotti & Emanuele Massetti & Massimo Tavoni, 2006. "WITCH. A World Induced Technical Change Hybrid Model," Working Papers 2006_46, Department of Economics, University of Venice "Ca' Foscari".
    3. Conconi, Paola & Perroni, Carlo, 2009. "Do credible domestic institutions promote credible international agreements?," Journal of International Economics, Elsevier, vol. 79(1), pages 160-170, September.
    4. Hollis B. Chenery, 1949. "Engineering Production Functions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 63(4), pages 507-531.
    5. Lisandro Abrego & Carlo Perroni, 2002. "Investment subsidies and Time-Consistent Environmental Policy," Oxford Economic Papers, Oxford University Press, vol. 54(4), pages 617-635, October.
    6. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    7. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 157-183, August.
    8. John A. Skip Laitner and Donald A. Hanson, 2006. "Modeling Detailed Energy-Efficiency Technologies and Technology Policies within a CGE Framework," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 151-170.
    9. Sav, G Thomas, 1984. "The Engineering Approach to Economic Production Functions Revisited: An Application to Solar Processes," Journal of Industrial Economics, Wiley Blackwell, vol. 33(1), pages 21-35, September.
    10. Raymond J.G.M. Florax & Henri L.F. de Groot & Peter Mulder (ed.), 2011. "Improving Energy Efficiency through Technology," Books, Edward Elgar Publishing, number 3830.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Teye, Evans Sackey & Quarshie, Philip Tetteh, 2021. "Impact of agriculture finance in modern technologies adoption for enhanced productivity and rural household economic wellbeing in Ghana: A case study of rice farmers in Shai-Osudoku District," SocArXiv 9ue2k, Center for Open Science.
    2. Taran Fæhn, Cathrine Hagem, Lars Lindholt, Ståle Mæland, and Knut Einar Rosendahl, 2017. "Climate policies in a fossil fuel producing country demand versus supply side policies," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Taran Faehn and Elisabeth T. Isaksen, 2016. "Diffusion of Climate Technologies in the Presence of Commitment Problems," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    2. Brita Bye & Taran Fæhn & Orvika Rosnes, 2015. "Residental energy efficiency and European carbon policies A CGE-analysis with bottom-up information on energy efficiency technologies," Discussion Papers 817, Statistics Norway, Research Department.
    3. Milan Ščasný & Emanuele Massetti & Jan Melichar & Samuel Carrara, 2015. "Quantifying the Ancillary Benefits of the Representative Concentration Pathways on Air Quality in Europe," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 383-415, October.
    4. Li, Haoyang & Wu, Nan, 2022. "Emission pricing, emission rebound, and the coverage scope of incomplete regulations," Journal of Environmental Economics and Management, Elsevier, vol. 113(C).
    5. Chiappinelli, Olga & May, Nils, 2022. "Too good to be true? Time-inconsistent renewable energy policies," Energy Economics, Elsevier, vol. 112(C).
    6. Barbara Dluhosch & Nikolai Ziegler, 2011. "The paradox of weakness in the politics of trade integration," Constitutional Political Economy, Springer, vol. 22(4), pages 325-354, December.
    7. Bohringer, Christoph & Rutherford, Thomas F., 2008. "Combining bottom-up and top-down," Energy Economics, Elsevier, vol. 30(2), pages 574-596, March.
    8. Nitzsche, Eric & Tscharaktschiew, Stefan, 2013. "Efficiency of speed limits in cities: A spatial computable general equilibrium assessment," Transportation Research Part A: Policy and Practice, Elsevier, vol. 56(C), pages 23-48.
    9. Junius, Karsten, 1997. "Economies of scale: A survey of the empirical literature," Kiel Working Papers 813, Kiel Institute for the World Economy (IfW Kiel).
    10. Kalkuhl, Matthias & Steckel, Jan Christoph & Edenhofer, Ottmar, 2020. "All or nothing: Climate policy when assets can become stranded," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    11. Diana Dimitrova, 2018. "The 2018 Nobel Prize in Economics," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 98-152.
    12. Landis, Florian & Rausch, Sebastian, 2017. "Deep transformations of the energy sector: A model of technology investment choice," Energy Economics, Elsevier, vol. 68(S1), pages 136-147.
    13. Tscharaktschiew, Stefan & Hirte, Georg, 2010. "The drawbacks and opportunities of carbon charges in metropolitan areas -- A spatial general equilibrium approach," Ecological Economics, Elsevier, vol. 70(2), pages 339-357, December.
    14. Feng, Shenghao & Zhang, Keyu, 2018. "Fuel-factor nesting structures in CGE models of China," Energy Economics, Elsevier, vol. 75(C), pages 274-284.
    15. Alistair Ulph & David Ulph, 2013. "Optimal Climate Change Policies When Governments Cannot Commit," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(2), pages 161-176, October.
    16. Daan P. van Soest & Herman R.J. Vollebergh, 2011. "Energy Investment Behaviour: Firm Heterogeneity and Subsidy Design," Chapters, in: Raymond J.G.M. Florax & Henri L.F. de Groot & Peter Mulder (ed.), Improving Energy Efficiency through Technology, chapter 9, Edward Elgar Publishing.
    17. Adnan Haider Bukhari & Safdar Ullah Khan, 2008. "A Small Open Economy DSGE Model for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 963-1008.
    18. Croce, M.M. & Nguyen, Thien T. & Raymond, S. & Schmid, L., 2019. "Government debt and the returns to innovation," Journal of Financial Economics, Elsevier, vol. 132(3), pages 205-225.
    19. Paolo Epifani & Gino Gancia, 2008. "The Skill Bias of World Trade," Economic Journal, Royal Economic Society, vol. 118(530), pages 927-960, July.
    20. Cukierman, Alex & Lippi, Francesco, 2001. "Labour Markets and Monetary Union: A Strategic Analysis," Economic Journal, Royal Economic Society, vol. 111(473), pages 541-565, July.

    More about this item

    Keywords

    Abatement costs; Climate technologies; Credible commitment; Computable general equilibrium model; Technological change; Technological diffusion; Hybrid modelling;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:768. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: L Maasø (email available below). General contact details of provider: https://edirc.repec.org/data/ssbgvno.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.