This paper studies the cost effectiveness of climate policy if there are technology externalities. For this purpose, we develop a forward-looking CGE model that captures empirical links between CO2 emissions associated with energy use, directed technical change and the economy. We find the cost-effective climate policy to include a combination of R&D subsidies and CO2 emission constraints, although R&D subsidies raise the shadow value of the CO2 constraint (i.e. CO2 price) because of a strong rebound effect from stimulating innovation. Furthermore, we find that CO2 constraints differentiated toward CO2-intensive sectors are more cost effective than constraints that generate uniform CO2 prices among sectors. Differentiated CO2 prices, through technical change and concomitant technology externalities, encourage growth in the non-CO2 intensive sectors and discourage growth in CO2-intensive sectors. Thus, it is cost effective to let the latter bear relatively more of the abatement burden. This result is robust to whether emission constraints, R&D subsidies or combinations of both are used to reduce CO2 emissions. / Abstract in HTML and technical report in PDF available on the Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change website (http://mit.edu/globalchange/www/).
| Identifer | oai:union.ndltd.org:MIT/oai:dspace.mit.edu:1721.1/32541 |
| Date | 04 1900 |
| Creators | Otto, Vincent M., Loeschel, Andreas, Reilly, John M. |
| Publisher | MIT Joint Program on the Science and Policy of Global Change |
| Source Sets | M.I.T. Theses and Dissertation |
| Language | en_US |
| Detected Language | English |
| Type | Technical Report |
| Format | 530774 bytes, application/pdf |
| Relation | Report no. 134 |
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