Green Technology Adoption under Uncertainty, Increasing Returns, and Complex Adaptive Dynamics

Sanjit Dhami and Paolo Zeppini

No 10900, CESifo Working Paper Series from CESifo

Abstract: We consider firms’ choices between a clean technology that benefits, and a dirty technology that harms, the environment. Green firms are more suited to the clean technology and brown firms are more suited to the dirty technology. We use a model derived from complexity theory that takes account of true uncertainty and increasing returns to technology adoption. We examine theoretically, the properties of the long-run equilibrium, and provide simulated time paths of technology adoption, using plausible dynamics. The long-run outcome is an `emergent property’ of the system, and is unpredictable despite there being no external technological or preference shocks. We describe the role of taxes and subsidies in facilitating adoption of the clean technology; the conflict between optimal Pigouvian taxes and adoption of clean technologies; the optimal temporal profile of subsidies; and the desirability of an international fund to provide technology assistance to poorer countries.

Keywords: technology choice; climate change; complexity; lock-in effects; increasing returns; green subsidies; public policy; Pigouvian taxes; stochastic dynamics (search for similar items in EconPapers)
JEL-codes: D01 D21 D90 H32 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-tid
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Working Paper: Green Technology Adoption under Uncertainty, Increasing Returns, and Complex Adaptive Dynamics (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10900

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