Non-cooperative and cooperative climate policies with anticipated breakthrough technology

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Global warming can be curbed by pricing carbon emissions and thus substituting fossil fuel with renewable energy consumption. Breakthrough technologies (e.g., fusion energy) can reduce the cost of such policies. However, the chance of such a technology coming to market depends on investment. We model breakthroughs as an irreversible tipping point in a multi-country world, with different degrees of international cooperation. We show that international spill-over effects of R&D in carbon-free technologies lead to double free-riding, strategic over-pollution and underinvestment in green R&D, thus making climate change mitigation more difficult. We also show how the demand structure determines whether carbon pricing and R&D policies are substitutes or complements.

Original languageEnglish
Number of pages25
JournalJournal of Environmental Economics and Management
DOIs
Publication statusAccepted/In press - 2019

Fingerprint

environmental policy
carbon
international cooperation
carbon emission
fossil fuel
global warming
pollution
market
cost
energy
Carbon
Pricing
Climate policy
policy
Pollution
Fossil fuels
Technology fusion
Free-riding
International cooperation
Renewable energy

Keywords

  • Carbon pricing
  • Feedback Nash equilibrium
  • Global warming
  • International cooperation
  • Non-cooperative policies
  • Renewable R&D
  • Tipping point

Cite this

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title = "Non-cooperative and cooperative climate policies with anticipated breakthrough technology",
abstract = "Global warming can be curbed by pricing carbon emissions and thus substituting fossil fuel with renewable energy consumption. Breakthrough technologies (e.g., fusion energy) can reduce the cost of such policies. However, the chance of such a technology coming to market depends on investment. We model breakthroughs as an irreversible tipping point in a multi-country world, with different degrees of international cooperation. We show that international spill-over effects of R&D in carbon-free technologies lead to double free-riding, strategic over-pollution and underinvestment in green R&D, thus making climate change mitigation more difficult. We also show how the demand structure determines whether carbon pricing and R&D policies are substitutes or complements.",
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Non-cooperative and cooperative climate policies with anticipated breakthrough technology. / Jaakkola, Niko; van der Ploeg, Frederick.

In: Journal of Environmental Economics and Management, 2019.

Research output: Contribution to JournalArticleAcademicpeer-review

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