Clean innovation, heterogeneous financing costs, and the optimal climate policy mix

Emanuele Campiglio, Alessandro Spiganti and Anthony Wiskich

Journal of Environmental Economics and Management, 2024, vol. 128, issue C

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)
Date: 2024
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Related works:
Working Paper: 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)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:128:y:2024:i:c:s0095069624001451

DOI: 10.1016/j.jeem.2024.103071

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