Scandinavian Working Papers in Economics

Working Paper Series,
Norwegian University of Life Sciences, School of Economics and Business

No 09-2017: Environmental Policy and the Direction of Technical Change

Mads Greaker , Tom-Reiel Heggedal () and Knut Einar Rosendahl
Additional contact information
Mads Greaker: Statistics Norway, Postal: Statistics Norway, Akersveien 26, 0177 Oslo
Tom-Reiel Heggedal: Norwegian Business School, Postal: Norwegian Business School, Nydalsveien 37, 0484 Oslo, Norway
Knut Einar Rosendahl: School of Economics and Business, Norwegian University of Life Sciences, Postal: Norwegian University of Life Sciences, School of Economics and Business, P.O. Box 5003 NMBU, N-1432 Ă…s, Norway

Abstract: Should governmentsdirectR&Dfrom"dirty"into"clean"technologies?Howim- portantisthiscomparedtocarbonpricing?Weinquireintothis,introducingtwo noveltiescomparedtorecentliterature.WeintroducedecreasingreturnstoR&D,and allowfuturecarbontaxestoin‡uencecurrentR&Ddecisions.Ourresultssuggestthat governmentsshouldprioritizecleanR&D.Dealingwithmajorenvironmentalproblems requires R&Dtoshifttocleantechnology.However,whenmostresearchersworkwith clean technology,bothproductivityspilloversandfuturerisksofbeingreplacedin- crease. Consequently,thewedgebetweenprivateandsocialvalueofaninnovationis largest forcleantechnologies.

Keywords: environment; directedtechnologicalchange; innovationpolicy

JEL-codes: O30; O31; O33

37 pages, December 7, 2017

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