Does Endogenous Technical Change Make a Difference in Climate Policy Analysis? A Robustness Exercise with the Feem-Rice Model

49 Pages Posted: 14 Jan 2005

See all articles by Marzio Galeotti

Marzio Galeotti

University of Milan - Department of Environmental Science and Policy (ESP); Fondazione Eni Enrico Mattei (FEEM); GREEN - Centre for Research on Geography, Resources, Environment, Energy & Networks

Carlo Carraro

Ca' Foscari University of Venice; CMCC - Euro Mediterranean Centre for Climate Change (Climate Policy Division); IPCC; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Centre for European Policy Studies, Brussels; Green Growth Knowledge Platform

Date Written: December 2004

Abstract

Technical change is generally considered the key to the solution of environmental problems, in particular global phenomena like climate change. Scientists differ in their views on the thaumaturgic virtues of technical change. There are those who are confident that pollution-free technologies will materialize at some time in the future and will prevent humans from suffering the catastrophic consequences of climate change. Others believe that there are inexpensive technologies already available and argue the case for no-regret adoption policies (e.g. subsidies). Others again believe that the process of technological change responds to economic stimuli. These economic incentives to technological innovation are provided not only by forces that are endogenous to the economic system, but also by suitably designed environmental and innovation policies. In this paper, we consider and translate into analytical counterparts these different views of technical change. We then study alternative formulations of technical change and, with the help of a computerized climate-economy model, carry out a number of optimization runs in order to assess what type of technical change plays a role (assuming it does) in the evaluation of the impact of climate change and of the policies designed to cope with it.

Keywords: Climate policy, Environmental modeling, Integrated assessment, Technical change

JEL Classification: H0, H2, H3

Suggested Citation

Galeotti, Marzio and Carraro, Carlo, Does Endogenous Technical Change Make a Difference in Climate Policy Analysis? A Robustness Exercise with the Feem-Rice Model (December 2004). FEEM Working Paper No. 152.04, Available at SSRN: https://ssrn.com/abstract=643521 or http://dx.doi.org/10.2139/ssrn.643521

Marzio Galeotti (Contact Author)

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Carlo Carraro

Ca' Foscari University of Venice ( email )

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