The Role of Technological Innovation in Global Climate Policy: Analysis of Gerlagh (2008)

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Title: The Role of Technological Innovation in Global Climate Policy: Analysis of Gerlagh (2008)
Authors: Wang, Chenyu
Date: 2014-08
Abstract: We made a comprehensive analysis about the Gerlagh (2008) paper called “A climate change policy-induced shift from innovations in carbon-energy production to carbon-energy savings”. In our paper, we think Gerlagh’s work have several errors and some misleading parts: (i) the initial value of energy related research and development (R&D) expenditures was too high (Shiell and Lyssenko (2014)), (ii) the appropriation rate “ω” needs to be added into the first order conditions of the technology variables (AYE, AMZ, AEZ), (iii) in the dynamic model programming part, Gerlagh maximizes the welfare function again in GAMS software which may lead to a second best result, (iv) in the business as usual scenario (BAU), Gerlagh takes into account the duplication effect (internalized) and in fact he should not, and that will result in too little R&D expenditure relative to the real case (Shiell and Lyssenko (2014)). Having realized these problems, the next step is to correct them. Firstly, we recalibrate the model taking account of (i) and (ii). Secondly, we re-run Gerlagh’s model with the new values taking account of (iii) as well. We show that, after correcting these problems, Gerlagh’s conclusion towards carbon taxes to address environmental climate change is still valid: ITC has a significant positive impact on abatement cost of greenhouse gas emissions.
URL: http://hdl.handle.net/10393/31679
CollectionScience économique - Mémoires // Economics - Research Papers
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