The Environment and Directed Technical Change
Daron Acemoglu, Philippe Aghion, Leonardo Bursztyn, David Hemous
American Economic Review · 2012 · Volume 102 · Issue 1
Abstract
This paper introduces endogenous and directed technical change in a growth model with environmental constraints. The final good is produced from "dirty" and "clean" inputs. We show that: (i) when inputs are sufficiently substitutable, sustainable growth can be achieved with temporary taxes/subsidies that redirect innovation toward clean inputs; (ii) optimal policy involves both "carbon taxes" and research subsidies, avoiding excessive use of carbon taxes; (iii) delay in intervention is costly, as it later necessitates a longer transition phase with slow growth; and (iv) use of an exhaustible resource in dirty input production helps the switch to clean innovation under laissez-faire. (JEL O33, O44, Q30, Q54, Q56, Q58)
Keywords
Technological Change: Choices and Consequences, Diffusion Processes, Environment and Growth, Nonrenewable Resources and Conservation: General, Climate, Natural Disasters, Global Warming, Environment and Development, Environment and Trade, Sustainability, Environmental Accounts and Accounting, Environmental Equity, Population Growth, Environmental Economics: Government Policy
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