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  3. American Economic Journal: Economic Policy
  4. November 2012
  5. Innovation and Climate Change Policy

American Economic Journal:
Economic Policy

ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)

Innovation and Climate Change Policy

  • Joshua S. Gans
American Economic Journal: Economic Policy
vol. 4, no. 4, November 2012
(pp. 125–45)
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Abstract

This paper examines whether climate change policies will induce innovation in environmentally friendly technologies. The model demonstrates that a tighter emissions cap will reduce the scale of fossil fuel usage and that this will diminish incentives to improve fossil fuel efficiencies. In addition, such policies may stimulate the relative demand for innovations that improve the efficiency of alternative energy but carbon scarcity may diminish innovation incentives overall. Only for technologies that directly abate carbon pollution will there be an unambiguously positive impact on innovation. These results have implications for climate change targets and the design of climate change policy. (JEL O31, Q54, Q55, Q58)

Citation

Gans, Joshua S. 2012. "Innovation and Climate Change Policy." American Economic Journal: Economic Policy, 4 (4): 125–45. DOI: 10.1257/pol.4.4.125

JEL Classification

  • O31 Innovation and Invention: Processes and Incentives
  • Q54 Climate; Natural Disasters; Global Warming
  • Q55 Environmental Economics: Technological Innovation
  • Q58 Environmental Economics: Government Policy
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