Event Information
Presented by: Prof. John Hassler, IIES, Stockholm University
Abstract:
We construct an integrated assessment model with multiple energy sources – including fossil fuels and “green energy” – and multiple world regions. The energy sources are imperfect substitutes and their production involve structures that are endogenous. In particular, firms can decide to lower the marginal cost of producing one form of energy at the expense of the marginal costs of other energy sources: there is directed technical change. In the lowering of these marginal costs, there are also spillovers, which are international. We analyze how (potentially region-specific) taxes affect output and the climate with and without the endogeneity of technology. We emphasize the second-best nature of taxation when optimal world-wide technology subsidies are not implemented.