Directed technical change and the adoption of CO2 abatement technology: The case of CO2 capture and storage

V.M. Otto, J. Reilly

Research output: Contribution to journalArticleAcademicpeer-review

26 Citations (Scopus)

Abstract

This paper studies the cost-effectiveness of combining traditional environmental policy, such as CO2-trading schemes, and technology policy that has aims of reducing the cost and speeding the adoption of CO2 abatement technology. For this purpose, we develop a dynamic general equilibrium model that captures empirical links between CO2 emissions associated with energy use, directed technical change and the economy. We specify CO2 capture and storage (CCS) as a discrete CO2 abatement technology. We find that combining CO2-trading schemes with an adoption subsidy is the most effective instrument to induce adoption of the CCS technology. Such a subsidy directly improves the competitiveness of the CCS technology by compensating for its markup over the cost of conventional electricity. Yet, introducing R&D subsidies throughout the entire economy leads to faster adoption of the CCS technology as well and in addition can be cost-effective in achieving the abatement target.
Original languageEnglish
Pages (from-to)2879-2898
JournalEnergy Economics
Volume30
Issue number6
DOIs
Publication statusPublished - 2008

Keywords

  • environmental-policy
  • dynamic incentives
  • pollution-control
  • firm incentives
  • instruments
  • substitution
  • panel

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