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

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  • Daubanes, Julien
  • Grimaud, André
  • Rougé, Luc

Abstract

The "green paradox" literature points out that environmental policies which are anticipated to become gradually more stringent over time may induce a more rapid extraction of fossil fuels, thus having a detrimental effect to the environment. The manifestation of such phenomena has been extensively studied in the case of taxes directly applied to the extraction of a polluting non-renewable resource and of subsidies applied to its non-polluting substitutes. This paper examines the effects of subsidies to "clean" R&D activities, aimed to improve the productivity of non-polluting substitutes. We borrow standard assumptions from the directed-technical-change literature to take a full account of the private incentives to perform R&D and of the patterns of complementarity/substitutability between dirty resource and clean non-resource sectors. We show that a gradual increase in relative subsidies to clean R&D activities does not have the adverse green paradox effect, which contradicts an earlier made conjecture. Instead, the presence of several R&D sectors implies arbitrages which give rise to other quite paradoxical results. However substitutable or complementary sectors are, and whatever the induced technological bias is, clean-R&D-support policies always enhance the long-run productivity of the resource and thus result in a less rapid extraction.

Suggested Citation

  • Daubanes, Julien & Grimaud, André & Rougé, Luc, 2012. "Green Paradox and Directed Technical Change: The Effects of Subsidies to Clean R&D," IDEI Working Papers 743, Institut d'Économie Industrielle (IDEI), Toulouse.
  • Handle: RePEc:ide:wpaper:26272
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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).
    6. Antoine Dechezleprêtre & Ralf Martin & Myra Mohnen, 2014. "Knowledge Spillovers from Clean and Dirty Technologies," CEP Discussion Papers dp1300, Centre for Economic Performance, LSE.

    More about this item

    JEL classification:

    • 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
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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