Green Paradox and Directed Technical Change: The Effects of Subsidies to Clean R&D

Julien Daubanes (), André Grimaud and Luc Rouge

No 12-337, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: The "green paradox" literature points out that environmental policies which are anticipated to become gradually more stringent over time may induce a more rapid extraction of fossil fuels, thus having a detrimental effect to the environment. The manifestation of such phenomena has been extensively studied in the case of taxes directly applied to the extraction of a polluting non-renewable resource and of subsidies applied to its non-polluting substitutes. This paper examines the effects of subsidies to "clean" R&D activities, aimed to improve the productivity of non-polluting substitutes. We borrow standard assumptions from the directed-technical-change literature to take a full account of the private incentives to perform R&D and of the patterns of complementarity/substitutability between dirty resource and clean non-resource sectors. We show that a gradual increase in relative subsidies to clean R&D activities does not have the adverse green paradox effect, which contradicts an earlier made conjecture. Instead, the presence of several R&D sectors implies arbitrages which give rise to other quite paradoxical results. However substitutable or complementary sectors are, and whatever the induced technological bias is, clean-R&D-support policies always enhance the long-run productivity of the resource and thus result in a less rapid extraction.

JEL-codes: O32 O41 Q32 (search for similar items in EconPapers)
Date: 2012-08
New Economics Papers: this item is included in nep-eff, nep-env, nep-ino and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.tse-fr.eu/sites/default/files/medias/doc/wp/env/wp_tse_337.pdf Full text (application/pdf)

Related works:
Working Paper: Green Paradox and Directed Technical Change: The Effect of Subsidies to Clean R&D (2013)
Working Paper: Green Paradox and Directed Technical Change: The Effects of Subsidies to Clean R&D (2012)
Working Paper: Green Paradox and Directed Technical Change: The Effects of Subsidies to Clean R&D (2012)
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:tse:wpaper:26215

Access Statistics for this paper

More papers in TSE Working Papers from Toulouse School of Economics (TSE) Contact information at EDIRC.
Bibliographic data for series maintained by ().