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Climate change mitigation policies�: Are R&D subsidies preferable to a carbon tax�?

  • André Grimaud
  • Gilles Lafforgue✝

We consider a general equilibrium climate change model with two endogenous R&Dsectors. First, we characterize the set of decentralized equilibria : to each vector of publictools – a carbon tax and a subsidy to each R&D sector – is associated a particularequilibrium. Second, we compute the optimal tools. Third, we perform various second-best analysis by imposing some constraints on one or several policy. The main resultsof the paper are the following : i) both a carbon tax and a green research subsidycontribute to the climate change mitigation ; ii) R&D subsidies have a large impact onthe consumption, and then on the social welfare, as compared with the carbon tax usedalone ; iii) those subsidies allow to spare the earlier generations who are, on the otherhand, penalized by a carbon tax.

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Article provided by Dalloz in its journal Revue d'économie politique.

Volume (Year): 118 (2008)
Issue (Month): 6 ()
Pages: 915-940

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Handle: RePEc:cai:repdal:redp_186_0915
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  1. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
  2. Jones, C-I & Williams, J-C, 1996. "Too Much of a Good Thing? The Economics of Investment in R&D," Papers 538, Harvard - Institute for International Development.
  3. Grimaud, André & Rougé, Luc, 2007. "Environment, Directed Technical Change and Economic Policy," IDEI Working Papers 384, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Popp, David, 2006. "ENTICE-BR: The effects of backstop technology R&D on climate policy models," Energy Economics, Elsevier, vol. 28(2), pages 188-222, March.
  5. Gerlagh , Reyer & Kverndokk, Snorre & Rosendahl, Knut Einar, 2008. "Linking Environmental and Innovation Policy," Memorandum 10/2008, Oslo University, Department of Economics.
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  7. Charles I. Jones & John C. Williams, . "Measuring the Social Return to R&D," Working Papers 97002, Stanford University, Department of Economics.
  8. David Popp, 2006. "Comparison of Climate Policies in the ENTICE-BR Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 163-174.
  9. William D. Nordhaus, 2006. "After Kyoto: Alternative Mechanisms to Control Global Warming," American Economic Review, American Economic Association, vol. 96(2), pages 31-34, May.
  10. Gerlagh, Reyer & Lise, Wietze, 2005. "Carbon taxes: A drop in the ocean, or a drop that erodes the stone? The effect of carbon taxes on technological change," Ecological Economics, Elsevier, vol. 54(2-3), pages 241-260, August.
  11. Edenhofer, Ottmar & Bauer, Nico & Kriegler, Elmar, 2005. "The impact of technological change on climate protection and welfare: Insights from the model MIND," Ecological Economics, Elsevier, vol. 54(2-3), pages 277-292, August.
  12. Reyer Gerlagh & Bob van der Zwaan, 2006. "Options and Instruments for a Deep Cut in CO2 Emissions: Carbon Dioxide Capture or Renewables, Taxes or Subsidies?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 25-48.
  13. Kahouli-Brahmi, Sondes, 2008. "Technological learning in energy-environment-economy modelling: A survey," Energy Policy, Elsevier, vol. 36(1), pages 138-162, January.
  14. Helmuth Cremer & Firouz Gahvari & Norbert Ladoux, 2001. "Second-Best Pollution Taxes and the Structure of Preferences," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 258-280, October.
  15. 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.
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