TY - JOUR
T1 - ENTICE-BR
T2 - The effects of backstop technology R&D on climate policy models
AU - Popp, David
N1 - Funding Information:
The author thanks Ian Sue Wing, Larry Goulder, Allan Manne, John Weyant, and seminar participants at Stanford University and Rensselaer Poytechnic Institute for helpful comments. Janna Matlack and Ashley Walter provided excellent research assistance. As usual, any remaining errors are solely the responsibility of the author. Financial support for this work was provided by the National Science Foundation under grant number SES-0001679.
PY - 2006/3
Y1 - 2006/3
N2 - Recent attempts to endogenize technology in climate policy models have produced mixed results. Models finding large gains from induced technological change (ITC) consider alternative energy technologies, but assume learning-by-doing, which ignores the opportunity costs of technological change. Models representing ITC through R&D spending consider opportunity costs, but typically include only a single representative energy technology. I address these shortcomings by including policy-induced energy R&D in a model with a backstop energy technology. While ITC is important, larger welfare gains come from simply adding an alternative technology to the model, as opportunity costs limit the role ITC can play. Moreover, since the backstop technology improves welfare even without climate policy, accurate policy analysis depends on a carefully constructed baseline simulation.
AB - Recent attempts to endogenize technology in climate policy models have produced mixed results. Models finding large gains from induced technological change (ITC) consider alternative energy technologies, but assume learning-by-doing, which ignores the opportunity costs of technological change. Models representing ITC through R&D spending consider opportunity costs, but typically include only a single representative energy technology. I address these shortcomings by including policy-induced energy R&D in a model with a backstop energy technology. While ITC is important, larger welfare gains come from simply adding an alternative technology to the model, as opportunity costs limit the role ITC can play. Moreover, since the backstop technology improves welfare even without climate policy, accurate policy analysis depends on a carefully constructed baseline simulation.
KW - Backstop
KW - Climate change
KW - Endogenous technological change
KW - Induced innovation
KW - R&D
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U2 - 10.1016/j.eneco.2005.10.004
DO - 10.1016/j.eneco.2005.10.004
M3 - Article
AN - SCOPUS:33644889660
SN - 0140-9883
VL - 28
SP - 188
EP - 222
JO - Energy Economics
JF - Energy Economics
IS - 2
ER -