ABSTRACT
Over the past decade considerable efforts have been directed toward evaluating alternative policies to reduce the atmospheric accumulation of greenhouse gases, particularly carbon dioxide (CO2). Initial assessments tended to disregard interconnections between technological change and CO2-abatement policies, treating the rate of technological progress as autonomous—that is, unrelated to policy changes or associated changes in relative prices. Recently, however, several researchers have emphasized that CO2 policies and the rate of technological change are connected: to the extent that public policies affect the prices of carbon-based fuels, they affect incentives to invest in research and development (R&D) aimed at bringing alternative fuels on-line earlier or at lower cost. Such policies may also prompt R&D oriented toward the discovery of new production methods that require less of any kind of fuel. Moreover, climate policies can affect the growth of knowledge through impacts on learning by doing: to the extent that these policies affect producers’ experience with alternative energy fuels or energy-conserving processes, they can influence the rate of advancement of knowledge.
