A Climate-Change Policy Induced Shift from Innovations in Energy Production to Energy Savings

No 2004.128, Working Papers from Fondazione Eni Enrico Mattei

Abstract: We develop an endogenous growth model with capital, labor and energy as production factors and three productivity variables that measure accumulated innovations for energy production, energy savings, and neutral growth. All markets are complete and perfect, except for research, for which we assume that the marginal social value exceeds marginal costs by factor four. The model constants are calibrated so that the model reproduces the relevant trends over the 1970-2000 period. The model contains a simple climate module, and is used to assess the impact of Induced Technological Change (ITC) for a policy that aims at a maximum level of atmospheric CO2 concentration (450 ppmv). ITC is shown to reduce the required carbon tax by about a factor 2, and to reduce costs of such a policy by about factor 10. Numerical simulations show that knowledge accumulation shifts from energy production to energy saving technology.

Keywords: Induced technological change; Environmental taxes; Partial equilibrium (search for similar items in EconPapers)
JEL-codes: H23 O31 O41 Q42 Q43 (search for similar items in EconPapers)
Date: 2004-10
New Economics Papers: this item is included in nep-ino
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2004.128

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