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Climate Change Mitigation Options and Directed Technical Change: A Decentralized Equilibrium Analysis

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

The paper considers a climate change growth model with three R&D sectors dedicated to energy, backstop and CCS (Carbon Capture and Storage) efficiency. First, we characterize the set of decentralized equilibria: A particular equilibrium is associated to each vector of public tools which includes a carbon tax and a subsidy to each R&D sector. Moreover, we show that it is possible to compute any equilibrium as the solution of a maximization program. Second, we solve the first-best optimum problem and we implement it by computing the vector of optimal tools. Finally, we illustrate the theoretical model using some calibrated functional specifications. In particular, we investigate the effects of various combinations of public policies (including the optimal ones) by determining the deviation of each corresponding equilibrium from the "laisser-faire" benchmark.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 510.

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Date of creation: Jun 2008
Date of revision: Nov 2009
Publication status: Published in Resource and Energy Economics, vol. 33, n. 4, 2011, p. 938-962.
Handle: RePEc:ide:wpaper:9255
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