"The Environment and Directed Technical Change"

by Acemoglu, Daron; Aghion, Philippe; Bursztyn, Leonardo; Hemous, David (2012)

Abstract

This paper introduces endogenous and directed technical change in a growth model with environmental constraints. The final good is produced from "dirty" and "clean" inputs. We show that: (i) when inputs are sufficiently substitutable, sustainable growth can be achieved with temporary taxes/subsidies that redirect innovation toward clean inputs; (ii) optimal policy involves both "carbon taxes" and research subsidies, avoiding excessive use of carbon taxes; (iii) delay in intervention is costly, as it later necessitates a longer transition phase with slow growth; and (iv) use of an exhaustible resource in dirty input production helps the switch to clean innovation under laissez-faire. (JEL O33, O44, Q30, Q54, Q56, Q58).

Links to Reference

• http://dx.doi.org/10.1257/aer.102.1.131
• https://www.ncbi.nlm.nih.gov/pubmed/26719595
• https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4692283
• https://scholar.google.ca/scholar?cluster=12578183228865700583,5240122694610369739&hl=en&as_sdt=0,5&sciodt=0,5

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