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Green Paradox and Directed Technical Change: The Effect of Subsidies to Clean R&D


  • Julien Daubanes
  • André Grimaud
  • Luc Rougé


We borrow standard assumptions from the non-renewable-resource-taxation and from the directed-technical-change literatures, to take a full account of the incentives to perform R&D activities in a dirty-resource sector and in a clean-resource-substitute sector. We show that a gradual rise in the subsidies to clean R&D activities causes a less rapid resource extraction, because it enhances the long-run resource productivity. Our result contradicts the green-paradox conjecture that technical improvements in resource substitutes accelerate resource extraction. Sector-specific innovation activities are tantamount to competing economic projects; general equilibrium with several R&D sectors implies no-arbitrage conditions that give rise to not-so-intuitive results.

Suggested Citation

  • Julien Daubanes & André Grimaud & Luc Rougé, 2013. "Green Paradox and Directed Technical Change: The Effect of Subsidies to Clean R&D," CESifo Working Paper Series 4334, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4334

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    References listed on IDEAS

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    Cited by:

    1. van der Ploeg, Frederick & Withagen, Cees, 2012. "Is there really a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 342-363.
    2. Antoine Dechezleprêtre & Ralf Martin & Myra Mohnen, 2014. "Knowledge Spillovers from Clean and Dirty Technologies," CEP Discussion Papers dp1300, Centre for Economic Performance, LSE.
    3. Frederick van der Ploeg & Cees Withagen, 2015. "Global Warming and the Green Paradox: A Review of Adverse Effects of Climate Policies," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 9(2), pages 285-303.
    4. Kempa, Karol & Haas, Christian, 2016. "Directed Technical Change and Energy Intensity Dynamics: Structural Change vs. Energy Efficiency," Annual Conference 2016 (Augsburg): Demographic Change 145722, Verein für Socialpolitik / German Economic Association.
    5. Antoine Dechezlepretre, Ralf Martin, Myra Mohnen, 2017. "Knowledge Spillovers from clean and dirty technologies," GRI Working Papers 135, Grantham Research Institute on Climate Change and the Environment.
    6. Christian Haas & Karol Kempa, 2016. "Directed Technical Change and Energy Intensity Dynamics: Structural Change vs. Energy Efficiency," MAGKS Papers on Economics 201610, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

    More about this item


    non-renewable resources; directed technical change; green paradox; environmental policy; R&D subsidies;

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models


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