FEEM working papers "Note di lavoro"
2010.096

The Optimal Climate Policy Portfolio when Knowledge Spills Across Sectors


Authors: Emanuele Massetti, Lea Nicita
JEL n.: C72, H23, Q25, Q28, O31, O41, Q54
Keywords: Technical Change, Climate Change, Development, Innovation, Spillovers

Abstract

This paper studies the implications for climate policy of the interactions between environmental and knowledge externalities. Using a numerical analysis performed with the hybrid integrated assessment model WITCH, extended to include mutual spillovers between the energy and the non-energy sector, we show that the combination between environmental and knowledge externalities provides a strong rationale for implementing a portfolio of policies for both emissions reduction and the internalisation of knowledge externalities. Moreover, we show that implementing technology policy as a substitute for stabilisation policy is likely to increase global emissions.

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