Diffusion of climate technologies in the presence of commitment problems
AbstractPublicly 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 768.
Date of creation: Jan 2014
Date of revision:
Abatement costs; Climate technologies; Credible commitment; Computable general equilibrium model; Technological change; Technological diffusion; Hybrid modelling;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-08 (All new papers)
- NEP-CMP-2014-03-08 (Computational Economics)
- NEP-ENE-2014-03-08 (Energy Economics)
- NEP-ENV-2014-03-08 (Environmental Economics)
- NEP-REG-2014-03-08 (Regulation)
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.:
- 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".
- Abrego, Lisandro & Perroni, Carlo, 1999.
"Investment Subsidies and Time-Consistent Environmental Policy,"
The Warwick Economics Research Paper Series (TWERPS)
533, University of Warwick, Department of Economics.
- 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.
- Lisandro Abrego & Carlo Perroni, . "Investment Subsidies and Time-Consistent Environmental Policy," EPRU Working Paper Series 99-19, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Conconi, Paola & Perroni, Carlo, 2006.
"Do Credible Domestic Institutions Promote Credible International Agreements?,"
CEPR Discussion Papers
5762, C.E.P.R. Discussion Papers.
- 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.
- Paola Conconi & Carlo Perroni, 2009. "Do Credible Domestic Institutions Promote Credible International Agreements?," ULB Institutional Repository 2013/98549, ULB -- Universite Libre de Bruxelles.
- 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.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
- 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.
- 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.
- Montero, Juan Pablo, 2011. "A note on environmental policy and innovation when governments cannot commit," Energy Economics, Elsevier, vol. 33(S1), pages S13-S19.
- Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer, vol. 2(2), pages 157-183, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (J Bruusgaard).
If references are entirely missing, you can add them using this form.