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

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

Abstract

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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Suggested Citation

  • Grimaud, André & Lafforgue, Gilles & Magné, Bertrand, 2008. "Climate Change Mitigation Options and Directed Technical Change: A Decentralized Equilibrium Analysis," IDEI Working Papers 510, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2009.
  • Handle: RePEc:ide:wpaper:9255
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    References listed on IDEAS

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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