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Green transitions and the prevention of environmental disasters: market based vs command-and-control policies

Francesco Lamperti, Mauro Napoletano () and Andrea Roventini
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Francesco Lamperti: Université Panthéon-Sorbonne - Paris 1 (UP1)

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Abstract: The paper compares the effects of market-based (M-B) and command-and-control (C&C) climate policies on the direction of technical change and the prevention of environmental disasters. Drawing on a model of endogenous growth and directed technical change, we show that M-B policies (carbon taxes and subsidies toward clean sectors) suffer from path dependence and exhibit bounded window of opportunities: delays in their implementation make them ineffective both in redirecting technical change, (i.e. triggering a transition toward clean energy) and in avoiding environmental catastrophes. On the contrary, we find that C&C interventions are favored by path dependence and guarantee policy effectiveness irrespectively of the timing of their introduction. As the hypothesis of path dependence in technological change has received vast empirical support and it is a key feature of many models of growth, we argue that C&C policies should be seen as a valuable and non-equivalent alternative to M-B interventions.

Keywords: Green transition; Environmental policy; Command and control; Carbon taxes (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-ene, nep-env and nep-hme
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Published in Macroeconomic Dynamics, 2019, pp.1-20

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