Work

Environmental Policy and the Direction of Technical Change

Year: 2017

Type: article

Abstract: Should governments direct research and development (R&D) away from “dirty” technologies towards “clean” ones? How important is this compared to carbon pricing? We address these questions with the introduction of two model features to the literature on directed technological change and the environment. We introduce decreasing returns to R&D, and allow future carbon taxes to influence current R&D decisions. Our results suggest that governments should prioritize clean R&D. Dealing with major environmental problems requires an R&D shift towards clean technology. However, in the case where most researchers are working with clean technology, both productivity spillovers and the risks of future replacement increase. Consequently, the gap between the private and social values of an innovation is greatest for clean technologies.

Source: Scandinavian Journal of Economics

DOI: 10.1111/sjoe.12254

Authors: Mads Greaker, Tom‐Reiel Heggedal, Knut Einar Rosendahl

Institutions: Statistics Norway, OsloMet – Oslo Metropolitan University, BI Norwegian Business School, Norwegian University of Life Sciences

Language: English

Topic: Climate Change Policy and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Climate action, Industry, innovation and infrastructure

Open Access status: green

Funders: Norges Forskningsråd, European Association of Environmental and Resource Economists