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

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  • André Grimaud
  • Gilles Lafforgue

Abstract

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.

Suggested Citation

  • André Grimaud & Gilles Lafforgue, 2008. "Climate change mitigation policies : Are R&D subsidies preferable to a carbon tax ?," Revue d'économie politique, Dalloz, vol. 118(6), pages 915-940.
  • Handle: RePEc:cai:repdal:redp_186_0915
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    2. Adrien Vogt-Schilb & Guy Meunier & Stéphane Hallegatte, 2013. "Should marginal abatement costs differ across sectors? The effect of low-carbon capital accumulation," Working Papers hal-00850682, HAL.
    3. Samuel Fankhauser & Cameron Hepburn & Jisung Park, 2010. "Combining Multiple Climate Policy Instruments: How Not To Do It," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 1(03), pages 209-225.
    4. Grimaud, André & Lafforgue, Gilles & Magné, Bertrand, 2011. "Climate change mitigation options and directed technical change: A decentralized equilibrium analysis," Resource and Energy Economics, Elsevier, vol. 33(4), pages 938-962.
    5. Macdonald,Kevin Alan David & Patrinos,Harry Anthony, 2021. "Education Quality, Green Technology, and the Economic Impact of Carbon Pricing," Policy Research Working Paper Series 9808, The World Bank.
    6. Pitelis, Alkis & Vasilakos, Nicholas & Chalvatzis, Konstantinos, 2020. "Fostering innovation in renewable energy technologies: Choice of policy instruments and effectiveness," Renewable Energy, Elsevier, vol. 151(C), pages 1163-1172.
    7. Adrien Vogt-Schilb & Guy Meunier & Hallegatte Stéphane, 2013. "Should marginal abatement costs differ across sectors? The effect of low-carbon capital accumulation," Post-Print hal-00829420, HAL.

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