Cost-effective environmental policy: Implications of induced technological change
Cost-effective environmental policy generally requires that all emission sources are faced with the same tax. In this paper I discuss how the existence of induced technological change may alter this result, if at least some of the effect is external to the firm. Focusing on learning by doing effects in abatement activities, it is shown that emission sources with external learning effects should be faced with a higher tax than emission sources with only autonomous technological change. By using simple numerical simulations, it is further investigated to what degree a cost-effective climate policy differs from a free quota market, under various assumptions about learning effects, diffusion of technology and environmental targets. The results indicate that optimal taxes may be significantly higher in the industrial world than in the developing world. Moreover, the industrial world's share of global abatement may be much higher in a cost-effective solution than in a free quota market. The global cost savings of a fully flexible implementation of the Kyoto Protocol are further questioned, as potential spillover effects of technological growth in the industrial world are not internalised in the market.
|Date of creation:||Jan 2002|
|Date of revision:|
|Contact details of provider:|| Postal: P.O.Box 8131 Dep, N-0033 Oslo, Norway|
Phone: (+47) 21 09 00 00
Fax: +47 - 62 88 55 95
Web page: http://www.ssb.no/en/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- J. E. Stiglitz, 1999. "Introduction," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 28(3), pages 249-254, November.
- Parry, Ian W. H., 1995. "Optimal pollution taxes and endogenous technological progress," Resource and Energy Economics, Elsevier, vol. 17(1), pages 69-85, May.
- Coe, David T & Helpman, Elhanan & Hoffmaister, Alexander, 1995.
"North-South R&D Spillovers,"
CEPR Discussion Papers
1133, C.E.P.R. Discussion Papers.
- Warwick J. McKibbin & Martin T. Ross & Robert Shackleton & Peter J. Wilcoxen, 1999.
"Emissions Trading, Capital Flows and the Kyoto Protocol,"
Economics and Environment Network Working Papers
9901, Australian National University, Economics and Environment Network.
- Warwick J. McKibbin & Martin T. Ross & Robert Shackleton & Peter J. Wilcoxen, 1999. "Emissions Trading, Capital Flows and the Kyoto Protocol," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 287-333.
- Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March.
- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-37, October.
- Paul Joskow & Nancy L. Rose, 1985. "The Effects of Technological Change, Experience, and Environmental Regulation on the Construction Cost of Coal-Burning Generating Units," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 1-17, Spring.
- Snorre Kverndokk & Lars Lindholt & Knut Rosendahl, 2000.
"Stabilization of CO 2 concentrations: mitigation scenarios using the Petro model,"
Environmental Economics and Policy Studies,
Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 3(2), pages 195-224, June.
- Snorre Kverndokk & Lars Lindholt & Knut Einar Rosendal, 2000. "Stabilisation of CO2 concentrations: Mitigation scenarios using the Petro model," Discussion Papers 267, Statistics Norway, Research Department.
- Grubler, Arnulf & Nakicenovic, Nebojsa & Victor, David G., 1999. "Dynamics of energy technologies and global change," Energy Policy, Elsevier, vol. 27(5), pages 247-280, May.
- Grubler, Arnulf & Messner, Sabine, 1998. "Technological change and the timing of mitigation measures," Energy Economics, Elsevier, vol. 20(5-6), pages 495-512, December.
- C Carraro & Jc Hourcade, 1998. "Climate modelling and policy strategies. The role of technical change and uncertainty," Post-Print hal-00716515, HAL.
- Snorre Kverndokk & Knut Rosendahl & Thomas Rutherford, 2004.
"Climate Policies and Induced Technological Change: Which to Choose, the Carrot or the Stick?,"
Environmental & Resource Economics,
Springer;European Association of Environmental and Resource Economists, vol. 27(1), pages 21-41, January.
- Kverndokk,S. & Rosendahl,K.E. & Rutherford,T.F., 2001. "Climate policies and induced technological change : which to choose the carrot or the stick?," Memorandum 26/2001, Oslo University, Department of Economics.
- Ehrlich, Paul R. & Wolff, Gary & Daily, Gretchen C. & Hughes, Jennifer B. & Daily, Scott & Dalton, Michael & Goulder, Lawrence, 1999. "Knowledge and the environment," Ecological Economics, Elsevier, vol. 30(2), pages 267-284, August.
- Kenneth J. Arrow, 1962. "The Economic Implications of Learning by Doing," Review of Economic Studies, Oxford University Press, vol. 29(3), pages 155-173.
- Goulder, Lawrence H. & Schneider, Stephen H., 1999. "Induced technological change and the attractiveness of CO2 abatement policies," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 211-253, August.
- Richard S.J. Tol, 1999. "Kyoto, Efficiency, and Cost-Effectiveness: Applications of FUND," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 131-156.
- Dowlatabadi, Hadi, 1998. "Sensitivity of climate change mitigation estimates to assumptions about technical change," Energy Economics, Elsevier, vol. 20(5-6), pages 473-493, December.
- Bovenberg, A.L. & Smulders, J.A., 1995.
"Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model,"
Other publications TiSEM
6784bb12-71fb-45a5-bf7e-8, Tilburg University, School of Economics and Management.
- Lans Bovenberg, A. & Smulders, Sjak, 1995. "Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model," Journal of Public Economics, Elsevier, vol. 57(3), pages 369-391, July.
- Gustavsson, Patrik & Hansson, Pär & Lundberg, Lars, 1996.
"Technology, Resource Endowments and International Competitiveness,"
Working Paper Series
138, Trade Union Institute for Economic Research.
- Gustavsson, Patrik & Hansson, Par & Lundberg, Lars, 1999. "Technology, resource endowments and international competitiveness," European Economic Review, Elsevier, vol. 43(8), pages 1501-1530, August.
- Demetrios Papathanasiou and Dennis Anderson, 2001. "Uncertainties in Responding to Climate Change: On the Economic Value of Technology Policies for Reducing Costs and Creating Options," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 79-114.
- Oliver, M. & Jackson, T., 1999. "The market for solar photovoltaics," Energy Policy, Elsevier, vol. 27(7), pages 371-385, July.
- Parry, Ian & Toman, Michael, 2000.
"Early Emissions Reduction Programs: An Application to CO2 Policy,"
dp-00-26, Resources For the Future.
- Ian W.H. Parry & Michael Toman, 2002. "Early Emission Reduction Programs: An Application to CO2 Policy," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 73-95.
- Jan Fagerberg, 1999.
"Technology, Policy, Growth - Theory, Evidence and Interpretation,"
Nordic Journal of Political Economy,
Nordic Journal of Political Economy, vol. 25, pages 5-14.
- Jan Fagerberg, 1996. "Technology, Policy, Growth - Theory, Evidence and Interpretation," Working Papers Archives 1996546, Centre for Technology, Innovation and Culture, University of Oslo.
- Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
- Arora, Ashish & Fosfuri, Andrea & Gambardella, Alfonso, 2001. "Specialized technology suppliers, international spillovers and investment: evidence from the chemical industry," Journal of Development Economics, Elsevier, vol. 65(1), pages 31-54, June.
- Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:314. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (L MaasÃ¸)
If references are entirely missing, you can add them using this form.