The Environment and Directed Technical Change

Philippe Aghion, Daron Acemoglu, Hémous, David and Leonardo Bursztyn

No 8660, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper introduces endogenous and directed technical change in a growth model with environmental constraints. A unique final good is produced by combining inputs from two sectors. One of these sectors uses "dirty" machines and thus creates environmental degradation. Research can be directed to improving the technology of machines in either sector. We characterize dynamic tax policies that achieve sustainable growth or maximize intertemporal welfare. We show that: (i) in the case where the inputs are sufficiently substitutable, sustainable long-run growth can be achieved with temporary taxation of dirty innovation and production; (ii) optimal policy involves both .carbon taxes. and research subsidies, so that excessive use of carbon taxes is avoided; (iii) delay in intervention is costly: the sooner and the stronger is the policy response, the shorter is the slow growth transition phase; (iv) the use of an exhaustible resource in dirty input production helps the switch to clean innovation under laissez-faire when the two inputs are substitutes. Under reasonable parameter values and with sufficient substitutability between inputs, it is optimal to redirect technical change towards clean technologies immediately and optimal environmental regulation need not reduce long-run growth.

Keywords: Environment; Exhaustible resources; Directed technological change; Innovation (search for similar items in EconPapers)
JEL-codes: C65 O30 O31 O33 (search for similar items in EconPapers)
Date: 2011-11
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env, nep-ino, nep-reg and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
https://cepr.org/publications/DP8660 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: The Environment and Directed Technical Change (2012)
Working Paper: The Environment and Directed Technical Change (2010)
Working Paper: The Environment and Directed Technical Change (2010)
Working Paper: The Environment and Directed Technical Change (2010)
Working Paper: The Environment and Directed Technical Change (2009)
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:cpr:ceprdp:8660

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP8660

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().