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Innovation and Climate Change Policy

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  • Joshua S. Gans

Abstract

This paper examines whether climate change policies will induce innovation in environmentally friendly technologies. The model demonstrates that a tighter emissions cap will reduce the scale of fossil fuel usage and that this will diminish incentives to improve fossil fuel efficiencies. In addition, such policies may stimulate the relative demand for innovations that improve the efficiency of alternative energy but carbon scarcity may diminish innovation incentives overall. Only for technologies that directly abate carbon pollution will there be an unambiguously positive impact on innovation. These results have implications for climate change targets and the design of climate change policy. (JEL O31, Q54, Q55, Q58)

Suggested Citation

  • Joshua S. Gans, 2012. "Innovation and Climate Change Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 4(4), pages 125-145, November.
  • Handle: RePEc:aea:aejpol:v:4:y:2012:i:4:p:125-45
    Note: DOI: 10.1257/pol.4.4.125
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    References listed on IDEAS

    as
    1. 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.
    2. Carlo Carraro, Emanuele Massetti, Lea Nicita, 2009. "How Does Climate Policy Affect Technical Change? An Analysis of the Direction and Pace of Technical Progress in a Climate-Economy Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
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    4. Gans, Joshua S, 1996. "Comparative Statics Made Simple: An Introduction to Recent Advances," Australian Economic Papers, Wiley Blackwell, vol. 35(66), pages 81-93, June.
    5. Philippe Aghion & Antoine Dechezleprêtre & David Hémous & Ralf Martin & John Van Reenen, 2016. "Carbon Taxes, Path Dependency, and Directed Technical Change: Evidence from the Auto Industry," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 1-51.
    6. 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.
    7. Gillingham, Kenneth & Newell, Richard G. & Pizer, William A., 2008. "Modeling endogenous technological change for climate policy analysis," Energy Economics, Elsevier, vol. 30(6), pages 2734-2753, November.
    8. Dechezlepretre, Antoine & Glachant, Matthieu & Hascic, Ivan & Johnstone, Nick & Meniere, Yann, 2009. "Invention and Transfer of Climate Change Mitigation Technologies on a Global Scale: A Study Drawing on Patent Data," Sustainable Development Papers 54361, Fondazione Eni Enrico Mattei (FEEM).
    9. Antoine Dechezleprêtre & Matthieu Glachant & Ivan Haščič & Nick Johnstone & Yann Ménière, 2011. "Invention and Transfer of Climate Change--Mitigation Technologies: A Global Analysis," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 109-130, Winter.
    10. Daron Acemoglu, 2010. "When Does Labor Scarcity Encourage Innovation?," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1037-1078.
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    14. 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.
    15. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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