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Restricted carbon emissions and directed R&D support; an applied general equilibrium analysis

Brita Bye and Karl Jacobsen

Energy Economics, 2011, vol. 33, issue 3, 543-555

Abstract: We analyse welfare effects of supporting general versus emission-saving technological development when carbon emissions are regulated by a carbon tax. We use a computable general equilibrium model with induced technological change (ITC). ITC is driven by two separate, economically motivated research and development (R&D) activities, one general and one emission-saving specified as carbon capture and storage (CCS). We study public revenue neutral policy alternatives targeted towards general R&D and CCS R&D. Support to general R&D is the welfare superior. However, the welfare gap between the two R&D policy alternatives is reduced with higher carbon tax levels. For sufficiently high levels of the carbon tax equal subsidy rates are preferred.

Keywords: Applied; general; equilibrium; Carbon; policy; Directed; technological; change; Endogenous; growth; Research; and; Development (search for similar items in EconPapers)
Date: 2011
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