 Abatement, R&D and growth with a pollution ceilingGilbert Kollenbach Journal of Economic Dynamics and Control, 2015, vol. 54, issue C, 1-16 Abstract: The consequences of the 2°C climate target and the implicitly imposed ceiling on CO2 have been analyzed in several studies. We use an endogenous growth model with a ceiling and an abatement option to study the effect of the ceiling on the allocation of limited funds for R&D, abatement and capital accumulation. It is found that the advantagenousness of abatement rises with the cost advantage of fossil fuel versus backstop. If the cost advantage is sufficiently large at some point in time it outweighs the costs of abatement and the gains of R&D and capital accumulation. The reallocation of production towards abatement may cause an increase or decrease in long-run consumption. In the latter case, abatement allows an intertemporal consumption trade-off which may even justify the disregard of everlasting growth. In case of stock dependent fossil fuel costs, an abatement induced speed-up of technology development may cause an increase in fossil fuel stock left in situ. Keywords: Climate change; Research and development; Abatement; Endogenous growth; Fossil fuel; Renewable resource (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:54:y:2015:i:c:p:1-16 DOI: 10.1016/j.jedc.2015.02.014 Access Statistics for this article Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok More articles in Journal of Economic Dynamics and Control from Elsevier |
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