Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/62988 
Year of Publication: 
2001
Series/Report no.: 
Memorandum No. 2001,26
Publisher: 
University of Oslo, Department of Economics, Oslo
Abstract: 
Policies to reduce emissions of greenhouse gases such as CO2 will affect the rate and pattern of technological change in alternative energy resources and other production processes. Imperfections in markets for non-polluting technologies imply that a decentralised economy does not deliver a socially optimal outcome, and this could justify policy interventions such as subsidies. This paper considers the welfare effects of technology subsidies as part of a carbon abatement policy package. We argue that the presence of spillovers in alternative energy technologies does not necessarily imply that subsidy policies are welfare improving. We illustrate this point in the context of a general equilibrium model with two forms of carbon-free energy, an existing “alternative energy” which is a substitute for carbon-based fuels, and “new vintage energy” which provides a carbon-free replacement for existing energy services. Subsidisation of alternative energy on the grounds of spillover effects can be welfare-worsening if it crowds-out new vintage technologies.
Subjects: 
Induced technological change
Climate change policies
Policy instruments
Computable general equilibrium models
JEL: 
D58
H21
O30
Q42
Document Type: 
Working Paper

Files in This Item:
File
Size
234.95 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.