TY - JOUR
T1 - Optimal timing of climate change policy
T2 - Interaction between carbon taxes and innovation externalities
AU - Gerlagh, R.
AU - Kverndokk, S.
AU - Rosendahl, K.E.
PY - 2009
Y1 - 2009
N2 - This paper addresses the impact of endogenous technology through research and development (R&D) on the timing of climate change policy. We develop a model with a stock pollutant (carbon dioxide) and abatement technological change through R&D, and we use the model to study the interaction between carbon taxes and innovation externalities. Our analysis shows that the timing of optimal emission reduction policy strongly depends on the set of policy instruments available. When climate-specific R&D targeting instruments are available, policy has to use these to step up early innovation. When these instruments are not available, policy has to steer innovation through creating demand for emission saving technologies. That is, carbon taxes should be high compared to the Pigouvian levels when the abatement industry is developing. Finally, we calibrate the model in order to explore the magnitude of the theoretical findings within the context of climate change policy.
AB - This paper addresses the impact of endogenous technology through research and development (R&D) on the timing of climate change policy. We develop a model with a stock pollutant (carbon dioxide) and abatement technological change through R&D, and we use the model to study the interaction between carbon taxes and innovation externalities. Our analysis shows that the timing of optimal emission reduction policy strongly depends on the set of policy instruments available. When climate-specific R&D targeting instruments are available, policy has to use these to step up early innovation. When these instruments are not available, policy has to steer innovation through creating demand for emission saving technologies. That is, carbon taxes should be high compared to the Pigouvian levels when the abatement industry is developing. Finally, we calibrate the model in order to explore the magnitude of the theoretical findings within the context of climate change policy.
M3 - Article
SN - 0924-6460
VL - 43
SP - 369
EP - 390
JO - Environmental & Resource Economics
JF - Environmental & Resource Economics
IS - 3
ER -