Skip to main content Accessibility help
×
Home

GREEN TRANSITIONS AND THE PREVENTION OF ENVIRONMENTAL DISASTERS: MARKET-BASED VS. COMMAND-AND-CONTROL POLICIES

  • Francesco Lamperti (a1), Mauro Napoletano (a2) and Andrea Roventini (a3)

Abstract

The paper compares the effects of market-based (M-B) and command-and-control (C&C) climate policies on the direction of technical change and the prevention of environmental disasters. Drawing on a model of endogenous growth and directed technical change, we show that M-B policies (carbon taxes and subsidies toward clean sectors) suffer from path dependence and exhibit bounded window of opportunities: delays in their implementation make them ineffective both in redirecting technical change, (i.e. triggering a transition toward clean energy) and in avoiding environmental catastrophes. On the contrary, we find that C&C interventions are favored by path dependence and guarantee policy effectiveness irrespectively of the timing of their introduction. As the hypothesis of path dependence in technological change has received vast empirical support and it is a key feature of many models of growth, we argue that C&C policies should be seen as a valuable and non-equivalent alternative to M-B interventions.

Copyright

Corresponding author

Address correspondence to: Francesco Lamperti, Institute of Economics, Scuola Superiore Sant’Anna, Piazza Martiri della Libertá 33, 56127 Pisa, Italy. e-mail: f.lamperti@santannapisa.it.

Footnotes

Hide All

This work was supported by the European Union Seventh FP for research, technological development, and demonstration under grant agreement No. 603416—Project IMPRESSIONS (impacts and risks from high-end scenarios: strategies for innovative solutions), the European Union’s Horizon 2020 research and innovation program under grant agreement No. 640772—DOLFINS and No. 649186—ISIGrowth. Moreover, the authors want to thank Giovanni Dosi, Daniele Giachini, Irene Monasterolo, and Alessandro Sapio for useful suggestions and discussions, as well as all the participants to the 2017 ISEFI Workshop for their comments. The comments of two referees and an associate editor helped improving the quality and readability of the paper. All the errors are responsibility of the authors.

Footnotes

References

Hide All
Acemoglu, D., Aghion, P., Bursztyn, L. and Hemous, D. (2012) The environment and directed technical change. American Economic Review 102(1), 131166.
Acemoglu, D., Hanley, D., Akcigit, U. and Kerr, W. (2016) Transition to clean technology. Journal of Political Economy, 124(1), 52104.
Aghion, P., Dechezlepretre, A., Hemous, D., Martin, R. and Van Reenen, J. (2016) Carbon taxes, path dependency and directed technical change: Evidence from the auto industry. Journal of Political Economy, 124(1), 151.
Bezin, E. (2017) The economics of green consumption, cultural transmission and sustainable technological change. Mimeo.
Bretschger, L. and Schaefer, A. (2017) Dirty history versus clean expectations: Can energy policies provide momentum for growth? European Economic Review, 99(Supplement C), 170190. Combating Climate Change. Lessons from Macroeconomics, Political Economy and Public Finance.
Buchanan, J. (1969) External diseconomies, corrective taxes, and market structure. American Economic Review 59(1), 174177.
Constant, K. and Davin, M. (2018) Environmental policy and growth when environmental policy is endogenous. Macroeconomic Dynamics 135. doi: 10.1017/S1365100517000189.
Durmaz, T. and Schroyen, F. (2016) Evaluating carbon capture and storage in a climate model with endogenous technical change. In: Energy: Expectations and Uncertainty, 39th IAEE International Conference, June 19–22, 2016, International Association for Energy Economics, Bergen.
Gans, J. S. (2012) Innovation and climate change policy. American Economic Journal: Economic Policy 4(4), 125145.
Gerlagh, R., Kverndokk, S. and Rosendahl, K. E. (2009) Optimal timing of climate change policy: Interaction between carbon taxes and innovation externalities. Environmental and Resource Economics 43(3), 369390.
Gillingham, K., Newell, R. G. and Pizer, W. A. (2008) Modeling endogenous technological change for climate policy analysis. Energy Economics 30(6), 27342753. Technological Change and the Environment.
Goudriaan, J. and Ketner, P. (1984) A simulation study for the global carbon cycle, including man’s impact on the biosphere. Climatic Change 6(2), 167192.
Goulder, L. H. and Parry, I. W. H. (2008) Instrument choice in environmental policy. Review of Environmental Economics and Policy 2(2), 152174.
Goulder, L. H. and Schneider, S. H. (1999) Induced technological change and the attractiveness of CO2 abatement policies. Resource and Energy Economics 21(3-4), 211253.
Greaker, M., Heggedal, T.-R. and Rosendahl, K. E. (2018) Environmental policy and the direction of technical change. The Scandinavian Journal of Economics, 120(4), 11001138.
Grimaud, A., Lafforgue, G. and Magné, B. (2011) Climate change mitigation options and directed technical change: A decentralized equilibrium analysis. Resource and Energy Economics 33(4), 938962. Special section: Sustainable Resource Use and Economic Dynamics.
Hemous, D. (2012) Environmental policy and directed technical change in a global economy: The dynamic impact of unilateral environmental policies. SSRN: https://ssrn.com/abstract=2184825.
Hepburn, C. (2006) Regulation by prices, quantities, or both: A review of instrument choice. Oxford Review of Economic Policy 22(2), 226247.
IEA (2016) Global renewable energy policies and measures database. http://www.iea.org/policiesandmeasures/renewableenergy/.
Jaffe, A. B., Newell, R. G. and Stavins, R. N. (2003) Technological change and the environment. In: Mäler, K. G. and Vincent, J. R. (eds.) Handbook of Environmental Economics, vol. 1, Chapter 11, pp. 461516. Elsevier.
Jobert, T., Karanfil, F. and Tykhonenko, A. (2018) Degree of stringencymatters: Revisiting the pollution haven hypothesis based on heterogenous panels and aggregate data. Macroeconomic Dynamics 123. doi: 10.1017/S136510051700092X.
Kruse-Andersen, P. (2017) Directed technical change, environmental sustainability, and population growth. Mimeo.
Lamperti, F., Dosi, G., Napoletano, M., Roventini, A. and Sapio, A. (2018) And then He Wasn’t a She: Climate Change and Green Transitions in an Agent-Based Integrated Assessment Model. Technical Report 2018/14, LEM Working Papers.
Lee, J., Veloso, F. M. and Hounshell, D. A. (2011) Linking induced technological change, and environmental regulation: Evidence from patenting in the U.S. auto industry. Research Policy 40(9), 12401252.
Li, Z. and Shi, S. (2010) Emission Tax or Standard? The Role of Productivity Dispersion. Department of Economics, University of Toronto, Working Papers tecipa-409.
Li, Z. and Sun, J. (2015). Emission taxes and standards in a general equilibrium with entry and exit. Journal of Economic Dynamics and Control 61, 3460.
Mattauch, L., Creutzig, F. and Edenhofer, O. (2015) Avoiding carbon lock-in: Policy options for advancing structural change. Economic Modelling 50, 4963.
Nordhaus, W. D. (1991) To slow or not to slow: The economics of the greenhouse effect. The Economic Journal 101(407), 920937.
Nordhaus, W. D. (1992) An optimal transition path for controlling greenhouse gases. Science 258(5086), 13151319.
Nordhaus, W. D. (2007) A review of the stern review on the economics of climate change. Journal of Economic Literature 45, 686702.
Oeschger, H., Siegenthaler, U., Schotterer, U. and Gugelmann, A. (1975) A box diffusion model to study the carbon dioxide exchange in nature. Tellus 27(2), 168192.
Otto, V. M. and Reilly, J. (2008) Directed technical change and the adoption of CO2 abatement technology: The case of CO2 capture and storage. Energy Economics 30(6), 28792898.
Palivos, T. and Varvarigos, D. (2017) Pollution abatement as a source of stabilization and long-run growth. Macroeconomic Dynamics 21(3), 644676.
Popp, D. (2002) Induced innovation and energy prices. The American Economic Review 92(1), 160180.
Popp, D. (2004) Entice: Endogenous technological change in the DICE model of global warming. Journal of Environmental Economics and Management 48(1), 742768.
Popp, D., Newell, R. G. and Jaffe, A. B. (2010) Energy, the environment, and technological change. In: Handbook of Economics of Innovation, vol. 2, pp. 873937. Elsevier.
Rozenberg, J., Vogt-Schilb, A. and Hallegatte, S. (2014) Transition to Clean Capital, Irreversible Investment and Stranded Assets. The World Bank, Policy Research Working Paper Series 6859.
Shapiro, J. S. and Walker, R. (2015). Why is pollution from U.S. manufacturing declining? The roles of trade, regulation, productivity, and preferences. NBER, Working Paper: No. 20879.
Smulders, S. and De Nooij, M. (2003) The impact of energy conservation on technology and economic growth. Resource and Energy Economics 25(1), 5979.
Stern, N. (2007) The Economics of Climate Change: The Stern Review. New York: Cambridge University Press.
Sue Wing, I. (2003) Induced Technical Change and the Cost of Climate Policy. Technical Report 102, MIT Joint Program on the Science and Policy of Global Change.
UN (1997) Glossary of Environment Statistics, Studies in Methods, Series F, No. 67. Technical Report, United Nations.
van den Bijgaart, I. (2017) The unilateral implementation of a sustainable growth path with directed technical change. European Economic Review 91, 305327.
van der Meijden, G. and Smulders, S. (2018) Technological change during the energy transition. Macroeconomic Dynamics 22(4), 805836.
Weitzman, M. L. (1974) Prices vs. quantities. Review of Economic Studies 41(4), 477491.

Keywords

Type Description Title
PDF
Supplementary materials

Lamperti et al. supplementary material
Appendix

 PDF (203 KB)
203 KB

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed