Citation

Discussion Paper Details

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Title: Environmental Policy and Directed Technical Change in a Global Economy: The Dynamic Impact of Unilateral Environmental Policies

Author(s): David H�mous

Publication Date: November 2013

Keyword(s): climate change, directed technical change, environment, innovation, trade and unilateral policy

Programme Area(s): International Macroeconomics and International Trade and Regional Economics

Abstract: This paper builds a two-country (North, South), two-sector (polluting, nonpolluting) trade model with directed technical change, examining whether unilateral environmental policies can ensure sustainable growth. The polluting good is produced with a clean and a dirty input. I show that a temporary Northern policy combining clean research subsidies and a trade tax can ensure sustainable growth but Northern carbon taxes alone cannot. Trade and directed technical change accelerate environmental degradation either under laissez-faire or if the North implements carbon taxes, yet both help reduce environmental degradation under the appropriate unilateral policy. I characterize the optimal unilateral policy analytically and numerically using calibrated simulations.

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Bibliographic Reference

H�mous, D. 2013. 'Environmental Policy and Directed Technical Change in a Global Economy: The Dynamic Impact of Unilateral Environmental Policies'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9733