Clean Innovation, Heterogeneous Financing Costs, and the Optimal Climate Policy Mix

Emanuele Campiglio, Alessandro Spiganti and Anthony Wiskich

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Access to finance is a major barrier to clean innovation. We incorporate a financial sector in a directed technological change model, where research firms working on different technologies raise funding from financial intermediaries at potentially different costs. We show that, in addition to a rising carbon tax and a generous but short-lived clean research subsidy, optimal climate policies include a clean finance subsidy directly aimed at reducing the financing cost differential across technologies. The presence of an endogenous financing experience effect induces stronger mitigation efforts in the short-term to accelerate the convergence of heterogeneous financing costs. This is achieved primarily through a carbon price premium of 39% in 2025, relative to a case with no financing costs.

Keywords: carbon tax; endogenous growth; innovation policy; green financial policy; low-carbon transition; optimal climate policy; sustainable finance (search for similar items in EconPapers)
JEL-codes: G18 H23 O31 O44 Q55 Q58 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2023-05, Revised 2024-05
New Economics Papers: this item is included in nep-ene, nep-env, nep-fdg, nep-ino, nep-sbm and nep-tid
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... wiskich_original.pdf Original version
https://cama.crawford.anu.edu.au/sites/default/fil ... _revised_oct2023.pdf Revised version
https://cama.crawford.anu.edu.au/sites/default/fil ... evised_may2024_0.pdf Revised version (application/pdf)

Related works:
Journal Article: Clean innovation, heterogeneous financing costs, and the optimal climate policy mix (2024)
Working Paper: Clean innovation, heterogeneous financing costs, and the optimal climate policy mix (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2023-25

Access Statistics for this paper

More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().