Climate policies and induced technological change: Which to choose the carrot or the stick?

Arbeitspapier

Policies to reduce emissions of greenhouse gases such as CO2 will affect the rate and pattern of technological change in alternative energy resources and other production processes. Imperfections in markets for non-polluting technologies imply that a decentralised economy does not deliver a socially optimal outcome, and this could justify policy interventions such as subsidies. This paper considers the welfare effects of technology subsidies as part of a carbon abatement policy package. We argue that the presence of spillovers in alternative energy technologies does not necessarily imply that subsidy policies are welfare improving. We illustrate this point in the context of a general equilibrium model with two forms of carbon-free energy, an existing “alternative energy” which is a substitute for carbon-based fuels, and “new vintage energy” which provides a carbon-free replacement for existing energy services. Subsidisation of alternative energy on the grounds of spillover effects can be welfare-worsening if it crowds-out new vintage technologies.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Memorandum ; No. 2001,26

Classification and Topics

• Classification: Wirtschaft ; Computable and Other Applied General Equilibrium Models ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Innovation; Research and Development; Technological Change; Intellectual Property Rights: General ; Alternative Energy Sources
• Subject: Induced technological change ; Climate change policies ; Policy instruments ; Computable general equilibrium models ; Klimaschutz ; Wohlfahrtseffekt ; Umwelttechnik ; Förderung regenerativer Energien ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kverndokk, Snorre ; Rosendahl, Knut Einar ; Rutherford, Thomas F.
• Event: Veröffentlichung
• (who): University of Oslo, Department of Economics
• (where): Oslo
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/62988
• Last update: 10.03.2025, 11:44 AM CET