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Policy implications of potential conflicts between short-term and long-term efficiency in CO2 emissions abatement

  • del Ri­o González, Pablo
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    This paper shows that, under certain conditions (including path dependence and lock-in), policies and measures leading to a cost-effective GHG emissions mitigation in the short term may not allow reaching long-term emissions targets at the lowest possible cost, that is, they might not be cost-effective in the long term. The reason is that, in a situation where currently expensive technologies have a large potential for cost reductions through learning effects and R&D investments, the implementation of incentive-based mitigation policies such as taxes or tradable permits will encourage the adoption and diffusion of currently low-cost abatement technologies, but might not be enough to make attractive the diffusion of expensive ones, which is a necessary condition for these technologies to realise their cost-reduction potential through the aforementioned effects. A simple model and a numerical simulation are provided to show this possible conflict between static and dynamic efficiency, which points out to the need to combine different instruments, some aiming at short-term cost-efficiency (such as incentive-based environmental policy) and others at encouraging dynamic cost reductions (such as technology/innovation policy).

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    File URL: http://www.sciencedirect.com/science/article/B6VDY-4P5RM15-4/1/a095d19b14a7f66307620dc865d201a3
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    Article provided by Elsevier in its journal Ecological Economics.

    Volume (Year): 65 (2008)
    Issue (Month): 2 (April)
    Pages: 292-303

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    Handle: RePEc:eee:ecolec:v:65:y:2008:i:2:p:292-303
    Contact details of provider: Web page: http://www.elsevier.com/locate/ecolecon

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