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Directed technical change and the adoption of CO2 abatement technology: The case of CO2 capture and storage

Listed author(s):
  • Otto, Vincent M.
  • Reilly, John

This paper studies the cost-effectiveness of combining traditional environmental policy, such as CO2-trading schemes, and technology policy that has aims of reducing the cost and speeding the adoption of CO2 abatement technology. For this purpose, we develop a dynamic general equilibrium model that captures empirical links between CO2 emissions associated with energy use, directed technical change and the economy. We specify CO2 capture and storage (CCS) as a discrete CO2 abatement technology. We find that combining CO2-trading schemes with an adoption subsidy is the most effective instrument to induce adoption of the CCS technology. Such a subsidy directly improves the competitiveness of the CCS technology by compensating for its markup over the cost of conventional electricity. Yet, introducing R&D subsidies throughout the entire economy leads to faster adoption of the CCS technology as well and in addition can be cost-effective in achieving the abatement target.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 30 (2008)
Issue (Month): 6 (November)
Pages: 2879-2898

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Handle: RePEc:eee:eneeco:v:30:y:2008:i:6:p:2879-2898
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  9. Vincent M. Otto & Andreas Löschel & John Reilly, 2006. "Directed Technical Change and Climate Policy," Working Papers 2006.81, Fondazione Eni Enrico Mattei.
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  15. Ferris, Michael C. & Munson, Todd S., 2000. "Complementarity problems in GAMS and the PATH solver," Journal of Economic Dynamics and Control, Elsevier, vol. 24(2), pages 165-188, February.
  16. Jung, Chulho & Krutilla, Kerry & Boyd, Roy, 1996. "Incentives for Advanced Pollution Abatement Technology at the Industry Level: An Evaluation of Policy Alternatives," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 95-111, January.
  17. David Popp, 2004. "ENTICE-BR: The Effects of Backstop Technology R&D on Climate Policy Models," NBER Working Papers 10285, National Bureau of Economic Research, Inc.
  18. 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.
  19. Kverndokk, Snorre & Rosendahl, Knut Einar & Rutherford, Thomas F., 2004. "Climate policies and induced technological change: Impacts and timing of technology subsidies," Memorandum 05/2004, Oslo University, Department of Economics.
  20. Adam Jaffe & Richard Newell & Robert Stavins, 2002. "Environmental Policy and Technological Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(1), pages 41-70, June.
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