The Environment and Directed Technical Change

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 tempo...

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Bibliographic Details
Published in:The American economic review 2012-02, Vol.102 (1), p.131-166
Main Authors: Acemoglu, Daron, Aghion, Philippe, Bursztyn, Leonardo, Hemous, David
Format: Article
Language:English
Subjects:
Alternative energy
Carbon
Carbon emissions
Carbon taxes
Clean technology
Climate change
Disasters
Economic conditions
Economic theory
Economics
Energy prices
Environmental disasters
Environmental impact
Environmental policy
Environmental protection
Environmental regulations
Environmental tax
Equilibrium
Fossil fuels
Growth models
Innovation
Innovations
Intervention
Laissez faire
Machinery
Nonrenewable resources
Pollution control
R&D
Regulation
Research & development
Studies
Subsidies
Sustainability
Tax subsidies
Taxes
Technological change
Technological innovation
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Summary: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.
ISSN:0002-8282
1944-7981
1944-7981
DOI:10.1257/aer.102.1.131