Impacts of CO2 taxes when there are niche markets and learning-by-doing

R. Gerlagh, B.C.C. van der Zwaan, M.W. Hofkes, G. Klaassen

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

In this paper, we analyse the impact of carbon taxes on emission levels, when niche markets exist for new carbon-free technologies, and when these technologies experience "learning-by-doing" effects. For this purpose, a general equilibrium model has been developed, DEMETER, that specifies two energy technologies: one based on fossil fuels and one on a composite of carbon-free technologies. Initially, the carbon-free technology has relatively high production costs, but niche markets ensure positive demand. Learning-by-doing decreases production costs, which increases the market share, which in turn accelerates learning-by-doing, and so forth. This mechanism allows a relatively modest carbon tax, of about 50 US$tC, to almost stabilise carbon emissions at their 2000 levels throughout the entire 21st century. Sensitivity analysis shows that the required carbon tax for emission stabilisation crucially depends on the elasticity of substitution between the fossil-fuel and carbon-free technology.
Original languageEnglish
Pages (from-to)367-394
Number of pages27
JournalEnvironmental and Resource Economics
Volume28
Issue number3
DOIs
Publication statusPublished - 2004

Fingerprint

Dive into the research topics of 'Impacts of CO2 taxes when there are niche markets and learning-by-doing'. Together they form a unique fingerprint.

Cite this