Climate Policy, Uncertainty, and the Role of Technological Innovation

Carolyn Fischer*, Thomas Sterner

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review


We study how uncertainty about climate change severity affects the relative benefits of early abatement and a portfolio of research and development (R&D) in lowering future abatement costs. Optimal early abatement depends on the curvature of the marginal benefit and marginal abatement cost (MAC) functions and how the uncertain parameter affects marginal benefits. R&D in a particular technology depends on whether uncertainty increases early abatement; whether investment lowers marginal costs for that technology; whether R&D lowers the slope of that technology's MAC function; and the shape of that technology's MAC function. We illustrate, focusing on the role of backstop technologies.

Original languageEnglish
Pages (from-to)285-309
Number of pages25
JournalJournal of Public Economic Theory
Issue number2
Publication statusPublished - Mar 2012


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