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Green Paradox and Directed Technical Change: The Effect of Subsidies to Clean R&D

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  • Julien Daubanes
  • André Grimaud
  • Luc Rougé

Abstract

We borrow standard assumptions from the non-renewable-resource-taxation and from the directed-technical-change literatures, to take a full account of the incentives to perform R&D activities in a dirty-resource sector and in a clean-resource-substitute sector. We show that a gradual rise in the subsidies to clean R&D activities causes a less rapid resource extraction, because it enhances the long-run resource productivity. Our result contradicts the green-paradox conjecture that technical improvements in resource substitutes accelerate resource extraction. Sector-specific innovation activities are tantamount to competing economic projects; general equilibrium with several R&D sectors implies no-arbitrage conditions that give rise to not-so-intuitive results.

Suggested Citation

  • Julien Daubanes & André Grimaud & Luc Rougé, 2013. "Green Paradox and Directed Technical Change: The Effect of Subsidies to Clean R&D," CESifo Working Paper Series 4334, CESifo.
    • Handle: RePEc:ces:ceswps:_4334
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    Cited by:

    1. Dechezlepretre, Antoine & Martin, Ralf & Mohnen, Myra, 2014. "Knowledge spillovers from clean and dirty technologies," LSE Research Online Documents on Economics 60501, London School of Economics and Political Science, LSE Library.
    2. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    3. Frederick van der Ploeg & Cees Withagen, 2015. "Global Warming and the Green Paradox: A Review of Adverse Effects of Climate Policies," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 9(2), pages 285-303.
    4. van der Ploeg, Frederick & Withagen, Cees, 2012. "Is there really a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 342-363.
    5. Christian Haas and Karol Kempa, 2018. "Directed Technical Change and Energy Intensity Dynamics: Structural Change vs. Energy Efficiency," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    6. Frederick Van Der Ploeg & Cees Withagen, 2014. "Growth, Renewables, And The Optimal Carbon Tax," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(1), pages 283-311, February.
    7. Peter K. Kruse-Andersen, 2019. "Directed Technical Change, Environmental Sustainability, and Population Growth," Discussion Papers 19-12, University of Copenhagen. Department of Economics.
    8. Kempa, Karol & Haas, Christian, 2016. "Directed Technical Change and Energy Intensity Dynamics: Structural Change vs. Energy Efficiency," VfS Annual Conference 2016 (Augsburg): Demographic Change 145722, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    non-renewable resources; directed technical change; green paradox; environmental policy; R&D subsidies;
    All these keywords.

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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