Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/127255 
Year of Publication: 
2006
Series/Report no.: 
Discussion Paper Series No. 436
Publisher: 
University of Heidelberg, Department of Economics, Heidelberg
Abstract: 
We study the optimal R&D trajectory in a setting where new technologies are never perfect backstops in the sense that there is no perfectly clean technology that eventually solves the pollution problem once and for all. New technologies have stings attached, i.e. each emits a specific stock pollutant. Damages are convex in individual pollution stocks but additive across stocks, creating gains from diversification. The research and pollution policies are tightly linked in such a setting. We derive the optimal pollution path and R&D program. Pollution stocks overshoot and in the long run all available technologies produce. Research is sequential and the optimal portfolio of technologies is finite.
Subjects: 
horizontal innovation
stock pollution
backstop technology
multistage optimal control
pollution thresholds
overshooting
JEL: 
Q55
Q53
O32
C61
Document Type: 
Working Paper

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