A paler shade of green: Environmental policy under induced technical change
Di Maria,C. Smulders,Sjak
Di Maria,C.
Smulders,Sjak
Abstract
Conventional wisdom argues that environmental policy is less costly if it induces the development of cleaner technologies. In contrast to this argument, we show that once the second-best nature of actual economies is taken into account, the cost of environmental policy may well be larger with induced technical change (ITC) than without. Thus, ITC may lower both the emissions reductions and the welfare gains associated with environmental policy. In an endogenous policy framework, ITC may reduce the desired stringency of the policy.
Description
Date
2017-10
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
environmental policy, innovation policy, induced technical change, pollution-saving technical change, pollution-using technical change, crowding-out, second-best policy, H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies, O38 - Government Policy, Q55 - Technological Innovation, Q58 - Government Policy, SDG 9 - Industry, Innovation, and Infrastructure
Citation
Di Maria, C & Smulders, S 2017, 'A paler shade of green : Environmental policy under induced technical change', European Economic Review, vol. 99, pp. 151-169. https://doi.org/10.1016/j.euroecorev.2017.01.002
License
info:eu-repo/semantics/closedAccess