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Clean innovation and heterogeneous financing costs

Emanuele Campiglio (), Alessandro Spiganti and Anthony Wiskich ()
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Emanuele Campiglio: Department of Economics, University of Bologna; RFF-CMCC European Institute on Economics and the Environment (EIEE), Milan; LSE Grantham Research Institute on Climate Change and the Environment, London
Anthony Wiskich: Centre for Applied Macroeconomic Analysis, Australian National University, Canberra

No 2023: 07, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: Access to finance is a major barrier to clean innovation. We incorporate a financial sector in a directed technological change model and identify optimal climate policies. The presence of a financing experience effect induces more ambitious policies in the short-term, both to boost clean innovation and production, and to reduce the financing cost differential across technologies. The optimal mix of climate policies (carbon taxes and clean research subsidies) depends on whether experience is gained through production or research. In our benchmark scenario, where clean financing costs decline as cumulative clean output increases, the carbon price premium is 22% in 2025, relative to a case with no financing costs.

Keywords: carbon tax; endogenous growth; financing experience effect; innovation policy; low-carbon transition; optimal climate policy; sustainable finance (search for similar items in EconPapers)
JEL-codes: H23 O31 O44 Q55 Q58 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2023
New Economics Papers: this item is included in nep-des, nep-ene, nep-env, nep-fdg, nep-ino, nep-res, nep-sbm and nep-tid
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