Transition to Clean Technology

54 Pages Posted: 6 Dec 2014  

Daron Acemoglu

Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Ufuk Akcigit

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); Center for Economic and Policy Research (CEPR)

Douglas Hanley

University of Pittsburgh

William R. Kerr

Harvard University - Entrepreneurial Management Unit

Multiple version iconThere are 3 versions of this paper

Date Written: December 3, 2014

Abstract

We develop a microeconomic model of endogenous growth where clean and dirty technologies compete in production and innovation. in the sense that research can be directed to either clean or dirty technologies. If dirty technologies are more advanced to start with, the potential transition to clean technology can be difficult both because clean research must climb several rungs to catch up with dirty technology and because this gap discourages research effort directed towards clean technologies. Carbon taxes and research subsidies may nonetheless encourage production and innovation in clean technologies, though the transition will typically be slow. We characterize certain general properties of the transition path from dirty to clean technology. We then estimate the model using a combination of regression analysis on the relationship between R&D and patents, and simulated method of moments using microdata on employment, production, R&D, firm growth, entry and exit from the US energy sector. The model’s quantitative implications match a range of moments not targeted in the estimation quite well. We then characterize the optimal policy path implied by the model and our estimates. Optimal policy makes heavy use of research subsidies as well as carbon taxes. We use the model to evaluate the welfare consequences of a range of alternative policies.

Keywords: carbon cycle, directed technological change, environment, innovation, optimal policy.

JEL Classification: O30, O31, O33, C65.

Suggested Citation

Acemoglu, Daron and Akcigit, Ufuk and Hanley, Douglas and Kerr, William R., Transition to Clean Technology (December 3, 2014). Harvard Business School Entrepreneurial Management Working Paper No. 15-045. Available at SSRN: https://ssrn.com/abstract=2533977 or http://dx.doi.org/10.2139/ssrn.2533977

Daron Acemoglu

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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Ufuk Akcigit

University of Chicago - Department of Economics ( email )

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Chicago, IL 60637
United States

HOME PAGE: http://www.ufukakcigit.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Center for Economic and Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Douglas Hanley

University of Pittsburgh ( email )

Pittsburgh, PA 15260
United States

HOME PAGE: http://doughanley.com

William R. Kerr (Contact Author)

Harvard University - Entrepreneurial Management Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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