Timing of innovation policies when carbon emissions are restricted: An applied general equilibrium analysis

Tom-Reiel Heggedal and Karl Jacobsen

Resource and Energy Economics, 2011, vol. 33, issue 4, 913-937

Abstract: This paper studies the timing of subsidies for emissions-saving research and development (R&D) and how innovation policy is influenced by a carbon tax. We develop a dynamic computable general equilibrium (CGE) model with both general R&D and specific emissions-saving R&D. We find two results that are important when subsidizing emissions-saving R&D in order to target inefficiencies in the research markets. First, the welfare gain from subsidies is larger when the carbon tax is high. This is because a high carbon tax raises the social value of the emissions-saving technology and that this increase in value is not fully appropriated by the private firms. Secondly, the welfare gain is greater when there is a falling time profile of the rate of subsidies for emissions-saving R&D, rather than a constant or increasing profile. The reason is that knowledge spillovers are larger in early periods.

Keywords: Applied general equilibrium; Carbon emissions; Endogenous growth; Research and development (search for similar items in EconPapers)
JEL-codes: E17 H23 O38 Q55 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Working Paper: Timing of innovation policies when carbon emissions are restricted: an applied general equilibrium analysis (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:33:y:2011:i:4:p:913-937

DOI: 10.1016/j.reseneeco.2010.12.002

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