Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/107711 
Year of Publication: 
2014
Series/Report no.: 
Nota di Lavoro No. 73.2014
Publisher: 
Fondazione Eni Enrico Mattei (FEEM), Milano
Abstract: 
We develop a theoretical model of directed technical change in which clean (zero emissions) and dirty (emissions-intensive) technologies are embodied in long-lived capital. We show how obsolescence costs generated by technological embodiment create inertia in a transition to clean growth. Optimal policies involve higher and longer-lasting clean R&D subsidies than when technologies are disembodied. From a low level, emissions taxes are initially increased rapidly, so they are higher in the long run. There is more warming. Introducing spillovers from an exogenous technological frontier representing non-energy-intensive technologies reduces mitigation costs. Optimal taxes and subsidies are lower and there is less warming.
Subjects: 
Climate Change Mitigation
Directed Technical Change
Capital-Embodiment
Investment-Specific Technological Change
Obsolescence
JEL: 
O33
O44
Q54
Q55
Q58
Document Type: 
Working Paper

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