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Designing a friendly space for technological change to slow global warming

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  • Nordhaus, William

Abstract

What is the best strategy to encourage research and development on new energy technologies in a market economy? What steps can ensure a rapid and efficient transition to an economy that has much lower net carbon emissions? This paper shows that, under limited conditions, a necessary and sufficient condition for an appropriate innovational environment is a universal, credible, and durable price on carbon emissions. Such a price would balance the marginal damages from carbon emissions against the marginal costs of abating emissions; it should not contain a correction factor for inducing technological change. This result, which the paper calls "price fundamentalism," applies principally to the market-oriented part of research and innovation. It is subject to qualifications regarding the efficacy of intellectual property protection and the proper level of carbon prices, and it applies primarily to market sectors. The role of appropriate prices on emissions is a central part of public policies to encourage technologies to combat global warming.

Suggested Citation

  • Nordhaus, William, 2011. "Designing a friendly space for technological change to slow global warming," Energy Economics, Elsevier, vol. 33(4), pages 665-673, July.
  • Handle: RePEc:eee:eneeco:v:33:y:2011:i:4:p:665-673
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    Cited by:

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    3. Kiriyama, Eriko & Kajikawa, Yuya & Fujita, Katsuhide & Iwata, Shuichi, 2013. "A lead for transvaluation of global nuclear energy research and funded projects in Japan," Applied Energy, Elsevier, vol. 109(C), pages 145-153.
    4. Girod, Bastien & Stucki, Tobias & Woerter, Martin, 2017. "How do policies for efficient energy use in the household sector induce energy-efficiency innovation? An evaluation of European countries," Energy Policy, Elsevier, vol. 103(C), pages 223-237.
    5. Kalkuhl, Matthias & Edenhofer, Ottmar & Lessmann, Kai, 2012. "Learning or lock-in: Optimal technology policies to support mitigation," Resource and Energy Economics, Elsevier, vol. 34(1), pages 1-23.
    6. Perino, Grischa & Willner, Maximilian, 2016. "Procrastinating reform: The impact of the market stability reserve on the EU ETS," Journal of Environmental Economics and Management, Elsevier, vol. 80(C), pages 37-52.
    7. 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.
    8. Bhardwaj, Chandan & Axsen, Jonn & McCollum, David, 2022. "Which “second-best” climate policies are best? Simulating cost-effective policy mixes for passenger vehicles," Resource and Energy Economics, Elsevier, vol. 70(C).
    9. Koch, Nicolas & Fuss, Sabine & Grosjean, Godefroy & Edenhofer, Ottmar, 2014. "Causes of the EU ETS price drop: Recession, CDM, renewable policies or a bit of everything?—New evidence," Energy Policy, Elsevier, vol. 73(C), pages 676-685.
    10. Pottier, Antonin & Hourcade, Jean-Charles & Espagne, Etienne, 2014. "Modelling the redirection of technical change: The pitfalls of incorporeal visions of the economy," Energy Economics, Elsevier, vol. 42(C), pages 213-218.
    11. Nemet, Gregory F., 2012. "Inter-technology knowledge spillovers for energy technologies," Energy Economics, Elsevier, vol. 34(5), pages 1259-1270.
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    13. Roper, Stephen & Tapinos, Efstathios, 2016. "Taking risks in the face of uncertainty: An exploratory analysis of green innovation," Technological Forecasting and Social Change, Elsevier, vol. 112(C), pages 357-363.
    14. Steven E. Sexton & A. Justin Kirkpatrick & Robert Harris & Nicholas Z. Muller, 2018. "Heterogeneous Environmental and Grid Benefits from Rooftop Solar and the Costs of Inefficient Siting Decisions," NBER Working Papers 25241, National Bureau of Economic Research, Inc.
    15. Edenhofer, Ottmar & Hirth, Lion & Knopf, Brigitte & Pahle, Michael & Schlömer, Steffen & Schmid, Eva & Ueckerdt, Falko, 2013. "On the economics of renewable energy sources," Energy Economics, Elsevier, vol. 40(S1), pages 12-23.
    16. Gregory F. Nemet and Adam R. Brandt, 2012. "Willingness to Pay for a Climate Backstop: Liquid Fuel Producers and Direct CO2 Air Capture," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    17. Perino, Grischa & Willner, Maximilian, 2017. "Why the EU Market Stability Reserve deters long-term low-carbon investments," WiSo-HH Working Paper Series 44, University of Hamburg, Faculty of Business, Economics and Social Sciences, WISO Research Laboratory.
    18. Jin, Wei, 2016. "International technology diffusion, multilateral R&D coordination, and global climate mitigation," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 357-372.
    19. Victor Court & Pierre-Andre Jouvet & Frédéric Lantz, 2018. "Long-Term Endogenous Economic Growth and Energy Transitions," The Energy Journal, , vol. 39(1), pages 29-58, January.
    20. Zha, Donglan & Jiang, Pansong & Zhang, Chaoqun & Xia, Dan & Cao, Yang, 2023. "Positive synergy or negative synergy: An assessment of the carbon emission reduction effect of renewable energy policy mixes on China's power sector," Energy Policy, Elsevier, vol. 183(C).
    21. Gunter Stephan & Georg M ller-F rstenberger, 2012. "Global Warming, Technology Transfer and Trade in Carbon Energy: Challenge or Threat?," Diskussionsschriften dp1206, Universitaet Bern, Departement Volkswirtschaft.
    22. Grischa Perino & Maximilian Willner, 2019. "Rushing the Impatient: Allowance Reserves and the Time Profile of Low-Carbon Investments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 845-863, October.
    23. Ding, H. & Zhou, D.Q. & Liu, G.Q. & Zhou, P., 2020. "Cost reduction or electricity penetration: Government R&D-induced PV development and future policy schemes," Renewable and Sustainable Energy Reviews, Elsevier, vol. 124(C).

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