Directed Technical Change With Capital-Embodied Technologies: Implications For Climate Policy

James Lennox and Jan Witajewski-Baltvilks

No 2014.73, Working Papers from Fondazione Eni Enrico Mattei

Abstract: We develop a theoretical model of directed technical change in which clean (zero emissions) and dirty (emissions-intensive) technologies are embodied in long-lived capital. We show how obsolescence costs generated by technological embodiment create inertia in a transition to clean growth. Optimal policies involve higher and longer-lasting clean R&D subsidies than when technologies are disembodied. From a low level, emissions taxes are initially increased rapidly, so they are higher in the long run. There is more warming. Introducing spillovers from an exogenous technological frontier representing non-energy-intensive technologies reduces mitigation costs. Optimal taxes and subsidies are lower and there is less warming.

Keywords: Climate Change Mitigation; Directed Technical Change; Capital-Embodiment; Investment-Specific Technological Change; Obsolescence (search for similar items in EconPapers)
JEL-codes: O33 O44 Q54 Q55 Q58 (search for similar items in EconPapers)
Date: 2014-08
New Economics Papers: this item is included in nep-ene, nep-env, nep-gro and nep-res
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Directed technical change with capital-embodied technologies: Implications for climate policy (2017)
Working Paper: Directed Technical Change With Capital-Embodied Technologies: Implications For Climate Policy (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2014.73

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