Second best analysis in a general equilibrium climate change model
Résumé
The paper considers a general equilibrium climate change model with two endogenous R&D sectors. First we characterize the set of decentralized equilibria: to each vector of public tools – a carbon tax and a subsidy to each R&D sector – is associated a particular equilibrium. Second, we compute the optimal tools. Third, we perform various second-best analysis. The main results of the paper are the following: i) the effect of the green research subsidy on resource extraction, and thus on the flow of pollution, can overrides the carbon tax one; ii) R&D subsidies have a very large impact on the total social welfare, as compared with the carbon tax; iii) Third, those subsidies allow to spare the earlier generations who are, on the other hand, strongly penalized by a carbon tax.
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