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What should we expect from innovation? A model-based assessment of the environmental and mitigation cost implications of climate-related R&D

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  • Bosetti, Valentina
  • Carraro, Carlo
  • Duval, Romain
  • Tavoni, Massimo

Abstract

This paper addresses two basic issues related to technological innovation and climate stabilization objectives: can innovation policies be effective in stabilizing climate? To what extent can innovation policies complement carbon pricing (taxes or permit trading) and improve the economic efficiency of a mitigation policy package? To answer these questions, we use an integrated assessment model with multiple externalities and an endogenous representation of the technical progress in the energy sector. We evaluate a range of innovation policies, both as stand-alone and in combination with other mitigation policies. Our analysis indicates that innovation policies alone are unlikely to stabilize global concentration and temperature. As for the benefits of combining climate and innovation policies, we find efficiency gains of 10% (6 USD Trillions in net present value terms) for a stringent climate policy, and 30% (3 USD Trillions) for a milder one. However, such gains are reduced when more plausible (sub-optimal) global innovation policy arrangements are considered.

Suggested Citation

  • Bosetti, Valentina & Carraro, Carlo & Duval, Romain & Tavoni, Massimo, 2011. "What should we expect from innovation? A model-based assessment of the environmental and mitigation cost implications of climate-related R&D," Energy Economics, Elsevier, vol. 33(6), pages 1313-1320.
  • Handle: RePEc:eee:eneeco:v:33:y:2011:i:6:p:1313-1320
    DOI: 10.1016/j.eneco.2011.02.010
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    References listed on IDEAS

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    1. Valentina Bosetti & Carlo Carraro & Romain Duval & Alessandra Sgobbi & Massimo Tavoni, 2009. "The Role of R&D and Technology Diffusion in Climate Change Mitigation: New Perspectives Using the WITCH Model," OECD Economics Department Working Papers 664, OECD Publishing.
    2. Bosetti, Valentina & Carraro, Carlo & Massetti, Emanuele & Tavoni, Massimo, 2008. "International energy R&D spillovers and the economics of greenhouse gas atmospheric stabilization," Energy Economics, Elsevier, vol. 30(6), pages 2912-2929, November.
    3. Carlo Carraro, Emanuele Massetti, Lea Nicita, 2009. "How Does Climate Policy Affect Technical Change? An Analysis of the Direction and Pace of Technical Progress in a Climate-Economy Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
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    11. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
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    Citations

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    Cited by:

    1. Marisa Beck, Randall Wigle, 2014. "Carbon Revenue: Recycling versus Technological Incentives," LCERPA Working Papers 0079, Laurier Centre for Economic Research and Policy Analysis, revised 13 Jan 2014.
    2. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.
    3. Hübler, Michael & Baumstark, Lavinia & Leimbach, Marian & Edenhofer, Ottmar & Bauer, Nico, 2012. "An integrated assessment model with endogenous growth," Ecological Economics, Elsevier, vol. 83(C), pages 118-131.
    4. Massimo Tavoni & Enrica Cian & Gunnar Luderer & Jan Steckel & Henri Waisman, 2012. "The value of technology and of its evolution towards a low carbon economy," Climatic Change, Springer, vol. 114(1), pages 39-57, September.
    5. Enrica Cian & Valentina Bosetti & Massimo Tavoni, 2012. "Technology innovation and diffusion in “less than ideal” climate policies: An assessment with the WITCH model," Climatic Change, Springer, vol. 114(1), pages 121-143, September.
    6. Wesseh, Presley K. & Lin, Boqiang, 2016. "Modeling environmental policy with and without abatement substitution: A tradeoff between economics and environment?," Applied Energy, Elsevier, vol. 167(C), pages 34-43.
    7. Jin, Wei & Zhang, ZhongXiang, 2016. "On the mechanism of international technology diffusion for energy technological progress," Resource and Energy Economics, Elsevier, vol. 46(C), pages 39-61.
    8. Wei Jin, 2012. "International Knowledge Spillover and Technology Externality: Why Multilateral R&D Coordination Matters for Global Climate Governance," CAMA Working Papers 2012-53, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    9. Giacomo Marangoni & Massimo Tavoni, 2013. "The Clean Energy R&D Strategy for 2°C," Working Papers 2013.93, Fondazione Eni Enrico Mattei.
    10. Claudio Baccianti & Andreas Löschel, 2014. "The Role of Product and Process Innovation in CGE Models of Environmental Policy," WWWforEurope Working Papers series 68, WWWforEurope.
    11. Duan, Hong-Bo & Zhu, Lei & Fan, Ying, 2014. "Optimal carbon taxes in carbon-constrained China: A logistic-induced energy economic hybrid model," Energy, Elsevier, vol. 69(C), pages 345-356.
    12. repec:eee:rensus:v:82:y:2018:i:p3:p:3623-3632 is not listed on IDEAS
    13. Carraro, Carlo & Favero, Alice & Massetti, Emanuele, 2012. "“Investments and public finance in a green, low carbon, economy”," Energy Economics, Elsevier, vol. 34(S1), pages 15-28.
    14. Jewell, Jessica & Cherp, Aleh & Riahi, Keywan, 2014. "Energy security under de-carbonization scenarios: An assessment framework and evaluation under different technology and policy choices," Energy Policy, Elsevier, vol. 65(C), pages 743-760.
    15. Wei Jin, 2012. "Can China Harness Globalization to Reap Carbon Savings? Modeling International Technology Diffusion in a Multi-region Framework," CAMA Working Papers 2012-52, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    16. Rubin, Edward S. & Azevedo, Inês M.L. & Jaramillo, Paulina & Yeh, Sonia, 2015. "A review of learning rates for electricity supply technologies," Energy Policy, Elsevier, vol. 86(C), pages 198-218.

    More about this item

    Keywords

    Climate change; Environmental policy; Energy R&D fund; Stabilization costs;

    JEL classification:

    • H0 - Public Economics - - General
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H4 - Public Economics - - Publicly Provided Goods
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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