FEEM working papers "Note di lavoro" series
2007 .006

Uncertain R&D, Backstop Technology and GHGs Stabilization

Authors: Valentina Bosetti, Massimo Tavoni
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Climate Change,Information and Uncertainty,Environmental Policy,Optimal R&D Investments
JEL n.: O32,Q54,Q55
JEL: Energy Economics
Pages: Vol. 31, Supplement 1, pp. S18-S26
Date: 2009


This paper analyses optimal investments in innovation when dealing with a stringent climate target and with the uncertain effectiveness of R&D. The innovation needed to achieve the deep cut in emissions is modelled by a backstop carbon-free technology whose cost depends on R&D investments. To better represent the process of technological progress, we assume that R&D effectiveness is uncertain. By means of a simple analytical model, we show how accounting for the uncertainty that characterizes technological advancement yields higher investments in innovation and lower policy costs. We then confirm the results via a numerical analysis performed with a stochastic version of WITCH, an energy-economy-climate model. The results stress the importance of a correct specification of the technological change process in economy-climate models.


Suggested citation: Valentina Bosetti, Massimo Tavoni, Uncertain R&D, backstop technology and GHGs stabilization, Energy Economics, Volume 31, Supplement 1, 2009, Pages S18-S26, ISSN 0140-9883, http://dx.doi.org/10.1016/j.eneco.2008.03.002

Download file
Download PDF file

FEEM Newsletter & Update

Subscribe to stay connected.

Your personal data will be processed by Fondazione Eni Enrico Mattei. – data Controller – with the aim of emailing the FEEM newsletter & Update. The use of Your email address is necessary for the implementation of the newsletter service. You are invited to read the Privacy Policy in order to obtain additional information about the protection of Your rights.

This Website uses technical cookies and cookie analytics, as well as “third party” profiling cookies.
If you close this banner or you decide to continue navigating on this Website, you express consent to the use of cookies. If you need additional information or you wish to express selective choices on the use of cookies, please refer to the   Cookie PolicyI agree