IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Climate change mitigation options and directed technical change: A decentralized equilibrium analysis

  • Grimaud, André
  • Lafforgue, Gilles
  • Magné, Bertrand

The paper considers an endogenous growth model with climate change as well as three R&D sectors dedicated to energy, CCS (Carbon Capture and Storage) and backstop efficiency. First, we characterize the set of decentralized equilibria: a particular equilibrium is associated with any vector of policy instruments including a carbon tax and a subsidy to each R&D sector. Second, we show that it is possible to express any equilibrium as the solution of a maximization program. Third, we solve the first-best optimum problem and thereby deriving the optimal instruments. Finally, we illustrate the theoretical model using calibrated functional specifications. In particular, we investigate the effects of various combinations of policy instruments (including the optimal ones) by determining the deviation of each corresponding equilibrium from the “laisser-faire” benchmark. We find notably that introducing an R&D subsidy hardly affects emissions when a carbon tax is already implemented, thus revealing a complementary effect between these two policy instruments.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0928765510000862
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 4 ()
Pages: 938-962

as
in new window

Handle: RePEc:eee:resene:v:33:y:2011:i:4:p:938-962
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505569

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Charles I. Jones & John C. Williams, . "Too Much of a Good Thing? The Economics of Investment in R&D," Working Papers 95006, Stanford University, Department of Economics.
  2. 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.
  3. Edenhofer, Ottmar & Bauer, Nico & Kriegler, Elmar, 2005. "The impact of technological change on climate protection and welfare: Insights from the model MIND," Ecological Economics, Elsevier, vol. 54(2-3), pages 277-292, August.
  4. Parry, Ian & Pizer, William & Fischer, Carolyn, 1998. "Instrument Choice for Environmental Protection When Technological Innovation is Endogenous," Discussion Papers dp-99-04, Resources For the Future.
  5. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  6. Bénassy, Jean-Pascal, 1996. "Is there always too little research in endogenous growth with expanding product variety ?," CEPREMAP Working Papers (Couverture Orange) 9615, CEPREMAP.
  7. David Popp, 2006. "Comparison of Climate Policies in the ENTICE-BR Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 163-174.
  8. André Grimaud & Luc Rouge, 2008. "Environment, Directed Technical Change and Economic Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(4), pages 439-463, December.
  9. Kolstad, Charles D. & Toman, Michael, 2005. "The Economics of Climate Policy," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 30, pages 1561-1618 Elsevier.
  10. Charles I. Jones & John C. Williams, 1997. "Measuring the social return to R&D," Finance and Economics Discussion Series 1997-12, Board of Governors of the Federal Reserve System (U.S.).
  11. Lafforgue, Gilles & Magné, Bertrand & Moreaux, Michel, 2008. "Energy substitutions, climate change and carbon sinks," Ecological Economics, Elsevier, vol. 67(4), pages 589-597, November.
  12. Reyer Gerlagh & Snorre Kverndokk & Knut Rosendahl, 2009. "Optimal Timing of Climate Change Policy: Interaction Between Carbon Taxes and Innovation Externalities," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 43(3), pages 369-390, July.
  13. Chakravorty, Ujjayant & Magne, Bertrand & Moreaux, Michel, 2006. "A Hotelling model with a ceiling on the stock of pollution," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2875-2904, December.
  14. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  15. repec:ner:tilbur:urn:nbn:nl:ui:12-3777015 is not listed on IDEAS
  16. Grimaud, André & Tournemaine, Frédéric, 2006. "Why can an environmental policy tax promote growth through the channel of education?," IDEI Working Papers 676, Institut d'Économie Industrielle (IDEI), Toulouse.
  17. Popp, David, 2004. "ENTICE: endogenous technological change in the DICE model of global warming," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 742-768, July.
  18. Hart, Rob, 2008. "The timing of taxes on CO2 emissions when technological change is endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 194-212, March.
  19. William D. Nordhaus, 2006. "After Kyoto: Alternative Mechanisms to Control Global Warming," American Economic Review, American Economic Association, vol. 96(2), pages 31-34, May.
  20. Bosetti, Valentina & Carraro, Carlo & Massetti, Emanuele & Sgobbi, Alessandra & Tavoni, Massimo, 2009. "Optimal energy investment and R&D strategies to stabilize atmospheric greenhouse gas concentrations," Resource and Energy Economics, Elsevier, vol. 31(2), pages 123-137, May.
  21. Popp, David, 2006. "ENTICE-BR: The effects of backstop technology R&D on climate policy models," Energy Economics, Elsevier, vol. 28(2), pages 188-222, March.
  22. 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.
  23. Snorre Kverndokk, 1994. "Depletion of Fossil Fuels and the impact of Global Warming," Discussion Papers 107, Research Department of Statistics Norway.
  24. Nemet, Gregory F. & Kammen, Daniel M., 2007. "U.S. energy research and development: Declining investment, increasing need, and the feasibility of expansion," Energy Policy, Elsevier, vol. 35(1), pages 746-755, January.
  25. Ottmar Edenhofer, Kai Lessmann, Nico Bauer, 2006. "Mitigation Strategies and Costs of Climate Protection: The Effects of ETC in the Hybrid Model MIND," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 207-222.
  26. Ulph, Alistair & Ulph, David, 1994. "The Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 857-68, Supplemen.
  27. Reyer Gerlagh & Snorre Kverndokk & Knut Einar Rosendah, 2008. "Linking Environmental and Innovation Policy," Working Papers 2008.53, Fondazione Eni Enrico Mattei.
  28. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
  29. Sinn, Hans-Werner, 2008. "Public policies against global warming: A supply side approach," Munich Reprints in Economics 19638, University of Munich, Department of Economics.
  30. Reyer Gerlagh, 2006. "ITC in a Global Growth-Climate Model with CCS: The Value of Induced Technical Change for Climate Stabilization," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 223-240.
  31. Valentina Bosetti & Carlo Carraro & Marzio Galeotti, 2005. "The Dynamics of Carbon and Energy Intensity in a Model of Endogenous Technical Change," Working Papers 2005.6, Fondazione Eni Enrico Mattei.
  32. Bergstrom, Theodore C, 1982. "On Capturing Oil Rents with a National Excise Tax," American Economic Review, American Economic Association, vol. 72(1), pages 194-201, March.
  33. Reyer Gerlagh & Bob van der Zwaan, 2006. "Options and Instruments for a Deep Cut in CO2 Emissions: Carbon Dioxide Capture or Renewables, Taxes or Subsidies?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 25-48.
  34. Nordhaus, William, 2011. "Designing a friendly space for technological change to slow global warming," Energy Economics, Elsevier, vol. 33(4), pages 665-673, July.
  35. Gerlagh, Reyer & Lise, Wietze, 2005. "Carbon taxes: A drop in the ocean, or a drop that erodes the stone? The effect of carbon taxes on technological change," Ecological Economics, Elsevier, vol. 54(2-3), pages 241-260, August.
  36. Farzin, Y H & Tahvonen, O, 1996. "Global Carbon Cycle and the Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 515-36, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:resene:v:33:y:2011:i:4:p:938-962. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.