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A carbon tax versus clean subsidies: Optimal and suboptimal policies for the clean transition

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  • Wiskich, Anthony

Abstract

A three-sector – services, clean and dirty - integrated assessment model with endogenous technology is described. Optimal policy leads to a period of intense clean research and requires a carbon tax and clean research subsidies. Using multiple calibrations, I explore the relative performance of these instruments when acting alone, along with a clean production subsidy and a dirty research tax. A carbon tax wins in most, but if optimal policy occurs after 2050, each instrument wins in some calibrations. Both a carbon tax and a clean production subsidy should apply if research instruments are unavailable. (JEL O30, O44, Q54, Q56, Q58).

Suggested Citation

  • Wiskich, Anthony, 2024. "A carbon tax versus clean subsidies: Optimal and suboptimal policies for the clean transition," Energy Economics, Elsevier, vol. 132(C).
    • Handle: RePEc:eee:eneeco:v:132:y:2024:i:c:s014098832400118x
    DOI: 10.1016/j.eneco.2024.107410
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    Cited by:

    1. Emanuele Campiglio & Alessandro Spiganti & Anthony Wiskich, 2023. "Clean Innovation, Heterogeneous Financing Costs, and the Optimal Climate Policy Mix," CAMA Working Papers 2023-25, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University, revised May 2024.

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    More about this item

    Keywords

    Climate change; Directed technical change; Climate policies; Carbon taxes; Clean subsidies;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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