Optimal Timing of Environmental Policy: Interaction Between Environmental Taxes and Innovation Externalities
This paper addresses the impact of endogenous technology through research and development (R&D) and learning by doing (LbD) on the timing of environmental policy. We develop two models, the first with technological change through R&D and the second with LbD. We study the interaction between environmental taxes and innovation externalities in a dynamic economy and prove policy equivalence between the second-best R&D and the LbD model. Our analysis shows that the difference found in the literature between optimal environmental policy in R&D and LbD models can partly be traced back to the set of policy instruments available, rather than being directly linked to the source of technological innovation. Arguments for early action in LbD models carry over to a second-best R&D setting. We show that environmental taxes should be high compared to the Pigouvian levels when an abatement industry is developing. We illustrate our analysis through numerical simulations on climate change policy.
|Date of creation:||11 Jan 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.htmlEmail:
More information through EDIRC
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.:
- Rolf Golombek & Michael Hoel, 2005.
"Climate Policy under Technology Spillovers,"
Environmental & Resource Economics,
European Association of Environmental and Resource Economists, vol. 31(2), pages 201-227, 06.
- Knut Einar Rosendahl, 2002.
"Cost-effective environmental policy: Implications of induced technological change,"
314, Research Department of Statistics Norway.
- Rosendahl, Knut Einar, 2004. "Cost-effective environmental policy: implications of induced technological change," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1099-1121, November.
- Bramoulle, Yann & Olson, Lars J., 2005. "Allocation of pollution abatement under learning by doing," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1935-1960, September.
- 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.
- Karl E. Knapp, 1999. "Exploring Energy Technology Substitution for Reducing Atmospheric Carbon Emissions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 121-143.
- Manne, Alan & Richels, Richard, 2004. "The impact of learning-by-doing on the timing and costs of CO2 abatement," Energy Economics, Elsevier, vol. 26(4), pages 603-619, July.
- Encaoua, D. & Ulph, D., 2000.
"Catching-up or Leapfrogging ? The Effects of Competition on Innovation and Growth,"
Papiers d'Economie MathÃ©matique et Applications
2000.97, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- David Encaoua & David Ulph, 2005. "Catching-up or Leapfrogging: The effects of competition on innovation and growth," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00177643, HAL.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975.
"Monopolistic Competition and Optimum Product Diversity,"
The Warwick Economics Research Paper Series (TWERPS)
64, University of Warwick, Department of Economics.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
- 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.
- William D. Nordhaus, 1969.
"An Economic Theory of Technological Change,"
Cowles Foundation Discussion Papers
265, Cowles Foundation for Research in Economics, Yale University.
- Kverndokk, Snorre & Rosendahl, Knut Einar, 2007. "Climate policies and learning by doing: Impacts and timing of technology subsidies," Resource and Energy Economics, Elsevier, vol. 29(1), pages 58-82, January.
- Minh Ha-Duong & Michael Grubb & Jean-Charles Hourcade, 1997. "Influence of socioeconomic inertia and uncertainty on optimal CO2-emission abatement," Post-Print halshs-00002452, HAL.
- Isoard, Stephane & Soria, Antonio, 2001. "Technical change dynamics: evidence from the emerging renewable energy technologies," Energy Economics, Elsevier, vol. 23(6), pages 619-636, November.
- Liski, Matti, 2002. "Taxing average emissions to overcome the shutdown problem," Journal of Public Economics, Elsevier, vol. 85(3), pages 363-384, September.
- Bovenberg, A Lans & de Mooij, Ruud A, 1997. "Environmental Levies and Distortionary Taxation: Reply," American Economic Review, American Economic Association, vol. 87(1), pages 252-53, March.
- 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.
- Robert J. Barro & Paul M. Romer, 1991.
National Bureau of Economic Research, Inc, number barr91-1, January.
- Rivers, Nic & Jaccard, Mark, 2006. "Choice of environmental policy in the presence of learning by doing," Energy Economics, Elsevier, vol. 28(2), pages 223-242, March.
- Romer, Paul M, 1990.
"Endogenous Technological Change,"
Journal of Political Economy,
University of Chicago Press, vol. 98(5), pages S71-102, October.
- Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
- 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.
- Hartman, Richard & Kwon, O-Sung, 2005. "Sustainable growth and the environmental Kuznets curve," Journal of Economic Dynamics and Control, Elsevier, vol. 29(10), pages 1701-1736, October.
- van der Zwaan, B. C. C. & Gerlagh, R. & G. & Klaassen & Schrattenholzer, L., 2002. "Endogenous technological change in climate change modelling," Energy Economics, Elsevier, vol. 24(1), pages 1-19, January.
- Grubler, Arnulf & Messner, Sabine, 1998. "Technological change and the timing of mitigation measures," Energy Economics, Elsevier, vol. 20(5-6), pages 495-512, December.
When requesting a correction, please mention this item's handle: RePEc:hhs:osloec:2006_026. 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: (Rhiana Bergh-Seeley)
If references are entirely missing, you can add them using this form.