Uncertain R&D, Backstop Technology and GHGs Stabilization

Valentina Bosetti and Massimo Tavoni ()

No 12048, Climate Change Modelling and Policy Working Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: This paper analyses optimal investments in innovation when dealing with a stringent climate target and with the uncertain effectiveness of R&D. The innovation needed to achieve the deep cut in emissions is modelled by a backstop carbon-free technology whose cost depends on R&D investments. To better represent the process of technological progress, we assume that R&D effectiveness is uncertain. By means of a simple analytical model, we show how accounting for the uncertainty that characterizes technological advancement yields higher investments in innovation and lower policy costs. We then confirm the results via a numerical analysis performed with a stochastic version of WITCH, an energy-economy-climate model. The results stress the importance of a correct specification of the technological change process in economy-climate models.

Keywords: Research; and; Development/Tech; Change/Emerging; Technologies (search for similar items in EconPapers)
Pages: 21
Date: 2007
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Citations: View citations in EconPapers (4)

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https://ageconsearch.umn.edu/record/12048/files/wp070006.pdf (application/pdf)

Related works:
Journal Article: Uncertain R&D, backstop technology and GHGs stabilization (2009)
Working Paper: Uncertain R&D, Backstop Technology and GHGs Stabilization (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemcc:12048

DOI: 10.22004/ag.econ.12048

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