1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

The Role of R&D and Technology Diffusion in Climate Change Mitigation

New Perspectives Using the WITCH Model

This paper uses the WITCH model, a computable general equilibrium model with endogenous technological change, to explore the impact of various climate policies on energy technology choices and the costs of stabilising greenhouse gas concentrations. Current and future expected carbon prices appear to have powerful effects on R&D spending and clean technology diffusion. Their impact on stabilisation costs depends on the nature of R&D: R&D targeted at incremental energy efficiency improvements has only limited effects, but R&D focused on the emergence of major new low-carbon technologies could lower costs drastically if successful – especially in the non-electricity sector, where such low-carbon options are scarce today. With emissions coming from multiple sources, keeping a wide range of options available matters more for stabilisation costs than improving specific technologies. Due to international knowledge spillovers, stabilisation costs could be further reduced through a complementary, global R&D policy. However, a strong price signal is always required.

English

Keywords: climate policy, stabilisation costs, energy R&D, fund
JEL: Q32: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Nonrenewable Resources and Conservation / Exhaustible Resources and Economic Development; H3: Public Economics / Fiscal Policies and Behavior of Economic Agents; H0: Public Economics / General; H4: Public Economics / Publicly Provided Goods; Q54: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Climate; Natural Disasters and Their Management; Global Warming; O3: Economic Development, Innovation, Technological Change, and Growth / Innovation; Research and Development; Technological Change; Intellectual Property Rights; H2: Public Economics / Taxation, Subsidies, and Revenue; Q43: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Energy / Energy and the Macroeconomy
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