What Should We Expect from Innovation? A Model-Based Assessment of the Environmental and Mitigation Cost Implications of Climate-Related R&D

30 Pages Posted: 7 May 2010 Last revised: 25 Apr 2012

See all articles by Valentina Bosetti

Valentina Bosetti

Bocconi University; CMCC - Euro Mediterranean Centre for Climate Change

Carlo Carraro

Fondazione Eni Enrico Mattei (FEEM); Ca' Foscari University of Venice; CMCC - Euro Mediterranean Centre for Climate Change (Climate Policy Division); IPCC; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Centre for European Policy Studies, Brussels; Green Growth Knowledge Platform; International Center for Climate Governance

Romain Duval

Organization for Economic Co-Operation and Development (OECD)

Massimo Tavoni

Fondazione Eni Enrico Mattei (FEEM); Princeton University - Princeton Environmental Institute

Multiple version iconThere are 3 versions of this paper

Date Written: May 4, 2010

Abstract

This paper addresses two basic issues related to technological innovation and climate stabilisation objectives: i) Can innovation policies be effective in stabilising greenhouse gas concentrations? ii) To what extent can innovation policies complement carbon pricing (taxes or permit trading) and improve the economic efficiency of a mitigation policy package? To answer these questions, we use an integrated assessment model with multiple externalities and an endogenous representation of technical progress in the energy sector. We evaluate a range of innovation policies, both as a stand-alone instrument and in combination with other mitigation policies. Even under fairly optimistic assumptions about the funding available for, and the returns to R&D, our analysis indicates that innovation policies alone are unlikely to stabilise global concentration and temperature. The efficiency gains of combining innovation and carbon pricing policies are found to reach about 10% for a stabilisation target of 535 ppm CO2eq. However, such gains are reduced when more plausible (sub-optimal) global innovation policy arrangements are considered.

Keywords: Climate Change, Environmental Policy, Energy R&D Fund, Stabilisation Costs

JEL Classification: H0, H2, H3, H4, O3, Q32, Q43, Q54

Suggested Citation

Bosetti, Valentina and Carraro, Carlo and Duval, Romain and Tavoni, Massimo, What Should We Expect from Innovation? A Model-Based Assessment of the Environmental and Mitigation Cost Implications of Climate-Related R&D (May 4, 2010). FEEM Working Paper No. 42.2010, CMCC Research Paper No. 83, Available at SSRN: https://ssrn.com/abstract=1600064

Valentina Bosetti (Contact Author)

Bocconi University

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CMCC - Euro Mediterranean Centre for Climate Change

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Carlo Carraro

Fondazione Eni Enrico Mattei (FEEM) ( email )

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IPCC ( email )

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Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute)

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Germany

Centre for European Policy Studies, Brussels

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Green Growth Knowledge Platform ( email )

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International Center for Climate Governance ( email )

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Romain Duval

Organization for Economic Co-Operation and Development (OECD) ( email )

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Paris Cedex 16, 75775
France

Massimo Tavoni

Fondazione Eni Enrico Mattei (FEEM) ( email )

Corso Magenta 63
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Italy

Princeton University - Princeton Environmental Institute

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Princeton, NJ 08544-0708
United States

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