Induced Technological Change Under Carbon Taxes

34 Pages Posted: 22 Nov 2003

See all articles by Reyer Gerlagh

Reyer Gerlagh

Tilburg University - Tilburg University School of Economics and Management

Lise Wietze

VU University Amsterdam - Institute for Environmental Studies (IVM)

Date Written: September 2003

Abstract

We develop an economic partial equilibrium model for energy supply and demand with capital and labor as production factors, and endogenous technological change through learning by research and learning by doing. Our model reproduces the learning curve typical for (bottom-up) energy system models. The model also produces an endogenous S-curved transition from fossil fuel energy sources to carbon-free energy sources over the coming two centuries. We use the model to study changes in fossil fuel and carbon-free energy use and carbon dioxide emissions induced by carbon taxes. It is shown that induced technological change accelerates the substitution of carbon-free energy for fossil fuels substantially, and can increase by factor 5 the cumulative emission reductions achieved through a carbon tax over the period 2000-2100.

Keywords: Induced technological change, Environmental taxes, Partial equilibrium, Learning by doing

JEL Classification: H23, O31, O41, Q42, Q43

Suggested Citation

Gerlagh, Reyer and Wietze, Lise, Induced Technological Change Under Carbon Taxes (September 2003). FEEM Working Paper No. 84.2003. Available at SSRN: https://ssrn.com/abstract=464841 or http://dx.doi.org/10.2139/ssrn.464841

Reyer Gerlagh (Contact Author)

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Lise Wietze

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1115
Amsterdam, 1081 HV
Netherlands
+31-20-4449503 (Phone)
+31-20-4449553 (Fax)

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