Environmental and technology policies for climate mitigation

Carolyn Fischer, Richard G. Newell*

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

We assess different policies for reducing carbon dioxide emissions and promoting innovation and diffusion of renewable energy. We evaluate the relative performance of policies according to incentives provided for emissions reduction, efficiency, and other outcomes. We also assess how the nature of technological progress through learning and research and development (R&D), and the degree of knowledge spillovers, affects the desirability of different policies. Due to knowledge spillovers, optimal policy involves a portfolio of different instruments targeted at emissions, learning, and R&D. Although the relative cost of individual policies in achieving reductions depends on parameter values and the emissions target, in a numerical application to the U.S. electricity sector, the ranking is roughly as follows: (1) emissions price, (2) emissions performance standard, (3) fossil power tax, (4) renewables share requirement, (5) renewables subsidy, and (6) R&D subsidy. Nonetheless, an optimal portfolio of policies achieves emissions reductions at a significantly lower cost than any single policy.

Original languageEnglish
Pages (from-to)142-162
Number of pages21
JournalJournal of Environmental Economics and Management
Volume55
Issue number2
DOIs
Publication statusPublished - Mar 2008

Keywords

  • Climate change
  • Externality
  • Learning
  • Policy
  • R&D
  • Renewable energy
  • Spillover
  • Technology

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