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ENTICE-BR: The Effects of Backstop Technology R&D on Climate Policy Models

  • David Popp
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    Recent attempts to endogenize technology in climate policy models have produced mixed results. Models including alternative technologies find large gains from induced technological change. However, technological progress in these models comes through learning-by-doing, which ignores the potential opportunity costs of technological change. Models using R&D spending as the driver of technological change address this. However, these models typically include only a single representative energy technology, substitution across technologies is not possible. This paper addresses these shortcomings by including policy-induced energy R&D in a model with a backstop energy technology. I show that, while induced technological change is important, larger welfare gains come from simply adding an alternative technology to the model. As in models with a single technology, opportunity costs of research limit the role induced innovation can play. Moreover, since the backstop technology improves welfare even without climate policy, accurate policy analysis depends on a carefully constructed baseline simulation.

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    File URL: http://www.nber.org/papers/w10285.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10285.

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    Date of creation: Feb 2004
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    Publication status: published as Popp, David. "ENTICE-BR: The Effects Of Backstop Technology R&D On Climate Policy Models," Energy Economics, 2006, v28(2,Mar), 188-202.
    Handle: RePEc:nbr:nberwo:10285
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    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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