Recent attempts to endogenize technology in climate policy models have produced mixed results. Models including alternative technologies find large gains from induced technological change. However, technological progress in these models comes through learning-by-doing, which ignores the potential op...

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Bibliographic Details

Main Author:	Popp, David 1970- (Author)
Format:	Book
Language:	English
Published:	Cambridge, Mass. National Bureau of Economic Research 2004
Series:	National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 10285
Subjects:	Climatic changes - Government policy - Mathematical models Klimaschutz / Technischer Fortschritt / Forschung / Umweltplanung Klimaänderung
Online Access:	Volltext
Summary:	Recent attempts to endogenize technology in climate policy models have produced mixed results. Models including alternative technologies find large gains from induced technological change. However, technological progress in these models comes through learning-by-doing, which ignores the potential opportunity costs of technological change. Models using R&D spending as the driver of technological change address this. However, these models typically include only a single representative energy technology, substitution across technologies is not possible. This paper addresses these shortcomings by including policy-induced energy R&D in a model with a backstop energy technology. I show that, while induced technological change is important, larger welfare gains come from simply adding an alternative technology to the model. As in models with a single technology, opportunity costs of research limit the role induced innovation can play. Moreover, since the backstop technology improves welfare even without climate policy, accurate policy analysis depends on a carefully constructed baseline simulation.
Physical Description:	50, 4, 8 S. graph. Darst.