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This paper analyses whether and how a climate polic y designed to stabilize greenhouse gases in the atmosphere is likely to change the direction and pa ce of technical progress. The analysis is performed using an upgraded version of WITCH, a dynamic integrated regional model of the world economy, which features a detailed representation of the energy se ctor. A non-energy R&D Sector, which enhances the productivity of the capital-labour aggregate, has b een added to the energy R&D sector already modelled in WITCH. Then, a global emission trading scheme designed to stabilize CO 2 concentrations at 450 ppm (550 ppm all GHG included) has been introduced. We find that, as a consequence, R&D is re-directed towards energy knowledge and that the ratio of ener gy to non-energy R&D investment increases significantly, as expected. Nonetheless, total opti mal R&D investments decrease, due to a more than proportional contraction of non-energy R&D. Indeed, when non-energy and energy inputs are weakly substitutable, the overall contraction of the econo mic activity associated with a climate policy may i nduce the decline in total R&D investments. By contrast, enhanced investments in energy R&D and in the energy sector are found not to “crowd-out” investme nts in non-energy R&D. |
