A paler shade of green: Environmental policy under induced technical change

Di Maria, Corrado ORCID: https://orcid.org/0000-0002-3048-0506 and Smulders, Sjak (2017) A paler shade of green: Environmental policy under induced technical change. European Economic Review, 99. pp. 151-169. ISSN 0014-2921

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Conventional wisdom argues that environmental policy is less costly if it induces the development of cleaner technologies. In contrast to this argument, we show that once the second-best nature of actual economies is taken into account, the cost of environmental policy may well be larger with induced technical change (ITC) than without. Thus, ITC may lower both the emissions reductions and the welfare gains associated with environmental policy. In an endogenous policy framework, ITC may reduce the desired stringency of the policy.

Item Type: Article
Uncontrolled Keywords: environmental policy,innovation policy,induced technical change,crowding-out,second-best policy
Faculty \ School: Faculty of Social Sciences > School of Economics
University of East Anglia > Faculty of Science > Research Centres > Tyndall Centre for Climate Change Research
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Depositing User: Pure Connector
Date Deposited: 11 Jan 2017 00:05
Last Modified: 20 Mar 2023 10:43
URI: https://ueaeprints.uea.ac.uk/id/eprint/61984
DOI: 10.1016/j.euroecorev.2017.01.002

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