Climate change mitigation policies: Are R&D subsidies preferable to a carbon tax?

TitleClimate change mitigation policies: Are R&D subsidies preferable to a carbon tax?
Publication TypeJournal Article
Year of Publication2008
AuthorsGrimaud, A, Lafforgue G
JournalRevue d'Economie Politique
Volume118
Issue6
Pagination915-940
Keywordscarbon tax, climate change, energy-directed technical change, research subsidies, second-best policies
Abstract

We consider a general equilibrium climate change model with two endogenous R&D sectors. First, we characterize the set of decentralized equilibria: to each vector of public tools - a carbon tax and a subsidy to each R&D sector - is associated a particular equilibrium. Second, we compute the optimal tools. Third, we perform various secondbest analysis by imposing some constraints on one or several policy. The main results of the paper are the following: i) both a carbon tax and a green research subsidy contribute to the climate change mitigation; ¡i) R&D subsidies have a large impact on the consumption, and then on the social welfare, as compared with the carbon tax used alone; iii) those subsidies allow to spare the earlier generations who are, on the other hand, penalized by a carbon tax.

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