• Economic instruments
for the global environment
Researchers
: O. Blanchard,
D. Cavard, P.
Criqui, M. Damian,
P. Menanteau,
S. Mima
Doctorate students : N.
Rousset, L.
Stankeviciute
__________
The development and implementation
of economic policy instruments presents two key questions that EPE’s
research addresses :
- the first relates to the nature of incentive mechanisms at the national
level, aimed at inducing new consumption and investment patterns or
new technology trajectories necessary to meet environmental commitments.
From this standpoint, economic efficiency is the principal concern,
but other constraints such as the characteristics of the energy sector
or dynamic efficiency need to be taken into account : e.g. technological
change and time lags play an important role;
- the second relates to the modalities and consequences of economic
incentive measures, in international environmental agreements. Here
the perceived equity of the different commitment schemes and their acceptability
by negotiating parties are paramount..
EPE research analyzes incentive mechanisms for the GHG emission reduction
that are largely designed on the basis of a cost-effectiveness approach
with an environmental objective imposed by a national institution or
by international convention. It leans on the welfare economics in which
the choice of regulatory instruments -- standards, price, or quantity-based
approaches -- is the principal issue. (see Cropper and Oates, JEL, 1992).
Indeed, it is the subject of the long-standing “taxes vs. permits”
debate. In this field, the rich environmental economics literature of
the 1970s (Dales, 1968 ; Baumol et Oates, 1971 ; Weitzman, 1974) remains
highly relevant and insightful for today’s climate change discussions.
The debate on regulatory instruments is far from closed, especially
as it increasingly seeks to account for and manage the large uncertainties
in future costs and damages. This renewed debate has unleashed a number
of hybrid instrument proposals such as the safety valve concept as seen
in Kopp, Morgenstern, Pizer and Toman (1999) and Kopp, Morgenstern et
Pizer (2000).
EPE’s economic research on the architecture of international environmental
agreements focuses on evaluation of alternative commitment regimes,
implementation of international emissions trading systems, and redistributive
impacts among countries. Recognizing the centrality of efficiency and
equity at once in the management of global public goods (Chichilnisky,
Heal, 1999),,EPE’s research focuses on the different commitment
options for developing countries and the necessity of differentiating
objectives based on income, as well as on current consumption patterns.
From this perspective, the multi-stage proposals analyzed at EPE combine
the use of the POLES model and the use of indicators that, in keeping
with Article 3.1 of the UN Framework Agreement on Climate Change, account
for historical responsibility and mitigation capacity of each party
to the Convention.
[publications]
_____________________________________
• Induced technical
change and climate policy
Researchers : O.
Blanchard, P. Criqui, G.
Destais, P. Menanteau, S.
Mima
Doctorate students
: J. Allaire, C.
Rynikiewicz
__________
EPE’s research addresses
economic analysis and modeling of technological change, which offers
the potential to reduce the long-term costs of emissions reduction.
The challenge here is to estimate the impacts induced by policies and
constraints upon the direction and intensity of technological change.
Research therefore analyzes the dynamics of emerging energy technologies,
evaluates the impact of policies that aim to guide and accelerate technological
change, and compares the efficiency of different economic instruments
in the diffusion of these technologies. The dichotomy and complementarity
among policies that stimulate technology development (technology push)
and policies that increase markets for new technologies (demand pull)
constitute a fundamental issue for research.
The theoretical foundations for this research look both to neo-classical
approaches to technological progress (market competition, learning-by-doing,
from Arrow) and to the evolutionary approaches that take into account
selection processes, increasing returns to adoption/scale, and path
dependency within technology portfolios. Different strands of the literature
are mobilized for this research, e.g work on induced technological progress
that build on the work of Hicks (1932), and notably Popp (2002), Jaffe
& Palmer (1997) or Newell et al., (1998) as well as the work of
evolutionists (Nelson & Winter, 1982 ; Rosenberg, 1982 ; Arthur,
1989). In a more targeted fashion, the analysis of technology policy
also leans on the incentive choice literature, in particular, Downing
& White (1986), Milliman & Prince (1989) or Weitzman (1974).
In terms of modeling, the concept of « two-factor learning curves
» has been developed and examined for different scenarios. This
type of specification, which takes into account not only learning effects,
but also the impacts of R&D on the costs and performance of technologies,
was first developed with research partners during earlier European projects.
This specification opens a particularly fertile path for research, and
constitutes a necessary path toward the endogenization of technological
progress in technology-rich models. The converging results obtained
by different models enable a better understanding of the magnitude and
dynamics of R&D programs on the cost of technologies, as well as
on a number of sustainable development indicators.
[publications]
