FEEM working papers "Note di lavoro" series
2010 .042

What Should We Expect from Innovation? A Model-Based Assessment of the Environmental and Mitigation Cost Implications of Climate-Related R&D


Authors: Valentina Bosetti, Carlo Carraro, Romain Duval, Massimo Tavoni
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Climate Change, Environmental Policy, Energy R&D Fund, Stabilisation Costs
JEL n.: H0, H2, H3, H4, O3, Q32, Q43, Q54
JEL: Energy Economics
Pages: Vol 33, No. 6, pp. 1313-1320
Date: 11/2011

Abstract

This paper addresses two basic issues related to technological innovation and climate stabilisation objectives: i) Can innovation policies be effective in stabilising greenhouse gas concentrations? ii) To what extent can innovation policies complement carbon pricing (taxes or permit trading) and improve the economic efficiency of a mitigation policy package? To answer these questions, we use an integrated assessment model with multiple externalities and an endogenous representation of technical progress in the energy sector. We evaluate a range of innovation policies, both as a stand-alone instrument and in combination with other mitigation policies. Even under fairly optimistic assumptions about the funding available for, and the returns to R&D, our analysis indicates that innovation policies alone are unlikely to stabilise global concentration and temperature. The efficiency gains of combining innovation and carbon pricing policies are found to reach about 10% for a stabilisation target of 535 ppm CO2eq. However, such gains are reduced when more plausible (sub-optimal) global innovation policy arrangements are considered.

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Suggested citation: Valentina Bosetti, Carlo Carraro, Romain Duval, Massimo Tavoni, What should we expect from innovation? A model-based assessment of the environmental and mitigation cost implications of climate-related R&D, Energy Economics, Volume 33, Issue 6, November 2011, Pages 1313-1320, ISSN 0140-9883, http://dx.doi.org/10.1016/j.eneco.2011.02.010

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