IDEAS home Printed from https://ideas.repec.org/p/eth/wpswif/24-391.html
   My bibliography  Save this paper

Boosting Sluggish Climate Policy: Endogenous Substitution, Learning, and Energy Efficiency Improvements

Author

Listed:
  • Lucas Bretschger

    (Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland)

  • Matthias Leuthard

    (Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland)

  • Alena Miftakhova

    (Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland)

Abstract

There is widespread concern that climate policy is moving too slowly and that decarbonization of economic development is coming too late for effective climate protection. We analyze three different effects that emerge endogenously during decarbonization and amplify current policies: growing substitutability of dirty inputs with clean inputs, learning and scale effects in new renewables, and efficiency improvements in the application of energy. We employ the CITE simulation model, a computable general equilibrium (CGE) model with endogenous growth dynamics, to represent the macroeconomic framework of climate policy, calibrate the impacts, and obtain quantitative results. We use data for the Swiss economy and find that all three effects significantly accelerate decarbonization and markedly reduce the costs of climate policy, with increasing substitutability having the strongest impact. Targeted policies such as subsidies to clean energy and research and development may amplify these effects and thereby speed up the transition towards a carbon-free economy.

Suggested Citation

  • Lucas Bretschger & Matthias Leuthard & Alena Miftakhova, 2024. "Boosting Sluggish Climate Policy: Endogenous Substitution, Learning, and Energy Efficiency Improvements," CER-ETH Economics working paper series 24/391, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:24-391
    as

    Download full text from publisher

    File URL: https://ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/wp-24-391.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Azusa OKAGAWA & Kanemi BAN, 2008. "Estimation of substitution elasticities for CGE models," Discussion Papers in Economics and Business 08-16, Osaka University, Graduate School of Economics.
    2. Carrara, Samuel & Marangoni, Giacomo, 2017. "Including system integration of variable renewable energies in a constant elasticity of substitution framework: The case of the WITCH model," Energy Economics, Elsevier, vol. 64(C), pages 612-626.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Böhringer, Christoph & Garcia-Muros, Xaquin & Gonzalez-Eguino, Mikel & Rey, Luis, 2017. "US climate policy: A critical assessment of intensity standards," Energy Economics, Elsevier, vol. 68(S1), pages 125-135.
    2. Dimaranan, Betina V. & Laborde, David, 2012. "Ethanol Trade Policy and Global Biofuel Mandates," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126869, International Association of Agricultural Economists.
    3. Pavel Ciaian & Andrey Ivanov & d'Artis Kancs, 2019. "Universal basic income: A viable policy alternative?," The World Economy, Wiley Blackwell, vol. 42(10), pages 2975-3000, October.
    4. Böhringer, Christoph & Fischer, Carolyn & Rosendahl, Knut Einar, 2014. "Cost-effective unilateral climate policy design: Size matters," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 318-339.
    5. Farrokhifar, Meisam & Nie, Yinghui & Pozo, David, 2020. "Energy systems planning: A survey on models for integrated power and natural gas networks coordination," Applied Energy, Elsevier, vol. 262(C).
    6. Wojciech Rabiega & Artur Gorzałczyński & Robert Jeszke & Paweł Mzyk & Krystian Szczepański, 2021. "How Long Will Combustion Vehicles Be Used? Polish Transport Sector on the Pathway to Climate Neutrality," Energies, MDPI, vol. 14(23), pages 1-19, November.
    7. Hermeling, Claudia & Löschel, Andreas & Mennel, Tim, 2013. "A new robustness analysis for climate policy evaluations: A CGE application for the EU 2020 targets," Energy Policy, Elsevier, vol. 55(C), pages 27-35.
    8. Sara Proença, 2013. "The role of renewable energy in Portugal´s decarbonisation strategy – application of the HyBGEM model," EcoMod2013 5647, EcoMod.
    9. Khabbazan, Mohammad M. & von Hirschhausen, Christian, 2021. "The implication of the Paris targets for the Middle East through different cooperation options," Energy Economics, Elsevier, vol. 104(C).
    10. M. Chepeliev, 2015. "Econometric estimation of capital-labor substitution elasticities for Ukrainian CGE model," Economy and Forecasting, Valeriy Heyets, issue 2, pages 33-46.
    11. Parrado, Ramiro & De Cian, Enrica, 2014. "Technology spillovers embodied in international trade: Intertemporal, regional and sectoral effects in a global CGE framework," Energy Economics, Elsevier, vol. 41(C), pages 76-89.
    12. Böhringer, Christoph & Lange, Andreas & Rutherford, Thomas F., 2014. "Optimal emission pricing in the presence of international spillovers: Decomposing leakage and terms-of-trade motives," Journal of Public Economics, Elsevier, vol. 110(C), pages 101-111.
    13. Yazid Dissou and Muhammad Shahid Siddiqui, 2013. "Regional Trade Agreements, Emissions Bubbles, and Carbon Tariff Harmonization," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    14. Antosiewicz, Marek & Witajewski-Baltvilks, Jan, 2021. "Short- and long-run dynamics of energy demand," Energy Economics, Elsevier, vol. 103(C).
    15. Timo Baas & Silvia Maja Melzer, 2012. "The Macroeconomic Impact of Remittances: A sending country perspective," Norface Discussion Paper Series 2012021, Norface Research Programme on Migration, Department of Economics, University College London.
    16. Antimiani, Alessandro & Costantini, Valeria & Martini, Chiara & Salvatici, Luca & Tommasino, Maria Cristina, 2011. "Cooperative and non-cooperative solutions to carbon leakage," Conference papers 332096, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    17. St�phanie Monjon & Philippe Quirion, 2011. "A border adjustment for the EU ETS: reconciling WTO rules and capacity to tackle carbon leakage," Climate Policy, Taylor & Francis Journals, vol. 11(5), pages 1212-1225, September.
    18. Jared C. Carbone, 2013. "Linking Numerical and Analytical Models of Carbon Leakage," American Economic Review, American Economic Association, vol. 103(3), pages 326-331, May.
    19. Böhringer, Christoph & Rutherford, Thomas F., 2013. "Transition towards a low carbon economy: A computable general equilibrium analysis for Poland," Energy Policy, Elsevier, vol. 55(C), pages 16-26.
    20. Lucas Bretschger & Roger Ramer & Florentine Schwark, 2010. "Long-Run Effects of Post-Kyoto Policies: Applying a Fully Dynamic CGE model with Heterogeneous Capital," CER-ETH Economics working paper series 10/129, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eth:wpswif:24-391. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/iwethch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.