To Everything There Is a Season: Carbon Pricing, Research Subsidies, and the Transition to Fossil-Free Energy

Abstract

We develop a climate policy model with directed technological change (DTC) in the energy sector. The model delivers both analytical and numerical results that give a clear understanding of the respective roles of research subsidies and emissions pricing. By contrast to existing models with DTC, ours is close in structure to recent integrated assessment models, leading to dramatically different results. Although clean-research subsidies are substantial initially, they subsequently decline whereas emissions taxes increase without bound. Furthermore, emissions taxes are far more important than research subsidies: in our baseline parameterization, a regulator unable to tax can only achieve 36% of potential benefits, whereas a regulator unable to subsidize can achieve 91% of potential benefits.

Keywords

directed technological change; knowledge spillovers; energy; climate change

Published in

Journal of the Association of Environmental and Resource Economists
2019, volume: 6, number: 2, pages: 135-175
Publisher: UNIV CHICAGO PRESS

SLU Authors

• Hart, Robert

  • Department of Economics, Swedish University of Agricultural Sciences
    

Global goals (SDG)

SDG7 Affordable and clean energy
SDG13 Climate action

UKÄ Subject classification

Economics

Publication identifier

• DOI: https://doi.org/10.1086/701805

Permanent link to this page (URI)

https://res.slu.se/id/publ/98188