Entice-Br: The Effects of Backstop Technology R&D on Climate Policy Models

64 Pages Posted: 12 Feb 2004 Last revised: 10 Aug 2022

See all articles by David Popp

David Popp

Syracuse University - Department of Public Administration; National Bureau of Economic Research (NBER)

Date Written: February 2004

Abstract

Recent attempts to endogenize technology in climate policy models have produced mixed results. Models including alternative technologies find large gains from induced technological change. However, technological progress in these models comes through learning-by-doing, which ignores the potential opportunity costs of technological change. Models using R&D spending as the driver of technological change address this. However, these models typically include only a single representative energy technology, substitution across technologies is not possible. This paper addresses these shortcomings by including policy-induced energy R&D in a model with a backstop energy technology. I show that, while induced technological change is important, larger welfare gains come from simply adding an alternative technology to the model. As in models with a single technology, opportunity costs of research limit the role induced innovation can play. Moreover, since the backstop technology improves welfare even without climate policy, accurate policy analysis depends on a carefully constructed baseline simulation.

Suggested Citation

Popp, David C., Entice-Br: The Effects of Backstop Technology R&D on Climate Policy Models (February 2004). NBER Working Paper No. w10285, Available at SSRN: https://ssrn.com/abstract=499862

David C. Popp (Contact Author)

Syracuse University - Department of Public Administration ( email )

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United States
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HOME PAGE: http://faculty.maxwell.syr.edu/dcpopp/index.html

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