Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98421
Authors: 
Kollenbach, Gilbert
Year of Publication: 
2014
Series/Report no.: 
Volkswirtschaftliche Diskussionsbeiträge, Universität Siegen, Fachbereich Wirtschaftswissenschaften Wirtschaftsinformatik und Wirtschaftsrecht 163-14
Abstract: 
The consequences of the 2° C climate target and the implicitly imposed ceiling on CO2 have been analyzed in several studies. We use an endogenous rowth model with a ceiling and a carbon capture and storage (CCS) technology to study the effect of the ceiling on the allocation of limited funds for R&D, CCS and capital accumulation. It turns out that the advantagenousness of CCS investments rise with the CO2 stock. If the gains of CCS, in terms of lower energy costs, outweigh the gains of R&D and capital accumulation, investments are reallocated towards CCS. On the one hand, this reduces the investments into R&D and/or capital. On the other hand, lower energy costs may increase research and/or capital investments. Positive CCS investments allow a higher extraction of fossil fuel, which implies lower backstop utilization. Consequently, CCS investments lower the advantageousness of R&D ceteris paribus. Furthermore, we show that the gains of CCS can be high enough to justify an investment reallocation even before the ceiling is binding, which contrast with existing literature.
Subjects: 
Climate Change
Research and Development
Carbon Capture and Storage
Endogenous Growth
Fossil Fuel
Renewable Resource
JEL: 
O13
O44
Q54
Document Type: 
Working Paper

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