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Green transitions and the prevention of environmental disasters: market based vs command-and-control policies

Author

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  • Francesco Lamperti

    (Université Panthéon-Sorbonne - Paris 1 (UP1))

  • Mauro Napoletano

    (Observatoire français des conjonctures économiques)

  • Andrea Roventini

    (Observatoire français des conjonctures économiques)

Abstract

The paper compares the effects of market-based (M-B) and command-and-control (C&C) climate policies on the direction of technical change and the prevention of environmental disasters. Drawing on a model of endogenous growth and directed technical change, we show that M-B policies (carbon taxes and subsidies toward clean sectors) suffer from path dependence and exhibit bounded window of opportunities: delays in their implementation make them ineffective both in redirecting technical change, (i.e. triggering a transition toward clean energy) and in avoiding environmental catastrophes. On the contrary, we find that C&C interventions are favored by path dependence and guarantee policy effectiveness irrespectively of the timing of their introduction. As the hypothesis of path dependence in technological change has received vast empirical support and it is a key feature of many models of growth, we argue that C&C policies should be seen as a valuable and non-equivalent alternative to M-B interventions.

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  • Francesco Lamperti & Mauro Napoletano & Andrea Roventini, 2019. "Green transitions and the prevention of environmental disasters: market based vs command-and-control policies," Sciences Po publications info:hdl:2441/14g286e42n8, Sciences Po.
    • Handle: RePEc:spo:wpmain:info:hdl:2441/14g286e42n8bl9is6h16b18kes
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    Cited by:

    1. Francesco Lamperti & Mariana Mazzucato & Andrea Roventini & Gregor Semieniuk, 2019. "The Green Transition: Public Policy, Finance, and the Role of the State," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 88(2), pages 73-88.
    2. Francesco Lamperti & Andrea Roventini, 2022. "Beyond climate economics orthodoxy: impacts and policies in the agent-based integrated-assessment DSK model," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 19(3), pages 357-380, December.
    3. Donnelly, David & Fricaudet, Marie & Ameli, Nadia, 2023. "“Accelerating institutional funding of low-carbon investment: The potential for an investment emissions intensity tax”," Ecological Economics, Elsevier, vol. 207(C).
    4. Fiorillo, Damiano & Sapio, Alessandro, 2019. "Energy saving in Italy in the late 1990s: Which role for non-monetary motivations?," Ecological Economics, Elsevier, vol. 165(C), pages 1-1.
    5. Lamperti, F. & Dosi, G. & Napoletano, M. & Roventini, A. & Sapio, A., 2020. "Climate change and green transitions in an agent-based integrated assessment model," Technological Forecasting and Social Change, Elsevier, vol. 153(C).
    6. Hötte, Kerstin, 2020. "How to accelerate green technology diffusion? Directed technological change in the presence of coevolving absorptive capacity," Energy Economics, Elsevier, vol. 85(C).
    7. Zhang, Dan & Zheng, Mingbo & Feng, Gen-Fu & Chang, Chun-Ping, 2022. "Does an environmental policy bring to green innovation in renewable energy?," Renewable Energy, Elsevier, vol. 195(C), pages 1113-1124.

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    Green transition; Environmental policy; Command and control; Carbon taxes;
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