innovation in the energy sector lessons learnt from r d expenditures and patents in selected iea countries abstract long time series of the iea and international patent offices offer a huge potential for scientific investigations of the energy innovation process thus this paper deals with a broad literature review on innovation drivers and barriers and an analysis of the knowledge induced by public research and development expenditures r d and patents in the energy sector the cumulative knowledge stock induced by public r d expenditures in 14 investigated iea countries is 102 3 bn eur in 2013 nuclear energy has the largest share of 43 9 bn eur followed by energy efficiency accounting for 14 9 bn eur fossil fuels with 13 5 bn eur and renewable energy with 12 1 bn eur a regression analysis indicates a linear relation between the gdp and the cumulative knowledge with each billion eur of gdp leading to an additional knowledge of 3 1 mil eur however linearity is not given for single energy technologies further the results show that appropriate public r d funding for research and development associated with a subsequent promotion of the market diffusion of a niche technology may lead to a breakthrough of the respective technology

uncertainty and endogenous technical change in climate policy models until recently endogenous technical change and uncertainty have been modeled separately in climate policy models in this paper we review the emerging literature that considers both these elements together taken as a whole the literature indicates that explicitly including uncertainty has important quantitative and qualitative impacts on optimal climate change technology policy

land acquisition political intervention fragmentation and voice abstract this paper develops a simple dynamic framework of holdout in land acquisition both with and without political intervention where holdout arises because of the landowners inability to manage large sums of money and consequent lack of inter temporal consumption smoothing in case of sale formalized as landowners having sophisticated present biased preferences we then use this framework to analyze two issues of interest political intervention and fragmentation we find that politicization cannot improve efficiency if holdout is landowner induced and may even increase inefficiency if holdout is buyer induced further the extent of politicization depends on whether it involves voice for non members or not turning to the effects of fragmentation we find that while it increases holdout in the absence of politicization in the presence of politicization this effect may however be reversed

gross versus net equalization scheme in a federation with decentralized leadership this paper compares the impact of two equalization transfer schemes on regional budgetary choices a gross equalization scheme where ex post transfers to regions are financed from federal tax revenues and a net equalization scheme where region to region ex post transfers allocated by the federal government are self financed the net equalization scheme reduces ex post federal intervention and should therefore be favored over the gross equalization scheme in order to reduce opportunistic regional behaviour in addition the two equalization schemes differently affect the composition of public expenditures the gross equalization scheme generates an upward distortion of the amount of capital public expenditures whereas the net equalization scheme generates a downward distortion of the amount of current public expenditures compared to the optimum a welfare analysis reveals that incentives to use a net equalization scheme are strengthened for a sufficiently high number of regions

bailouts in federations is a hard budget constraint always best this article analyses hard and soft budget constraints in a federation where there is a moral hazard problem between the central and the regional governments regional governments can avoid a bailout from the center by exerting costly effort in this setting a hard budget constraint is not always optimal because it can provide excessive incentives for high effort and thus discourage investment that is socially efficient thus a hard budget constraint can imply the opposite kind of inefficiency that emerges under a soft budget constraint where the common pool problem can give rise to inefficiently low effort and overinvestment

does tax competition soften regional budget constraint this paper analyses the impact of both horizontal and vertical tax competition on central government transfers towards regions as well as on the softness of the regional budget constraint we show that tax interactions have no impact on the optimal central government grant whereas they harden the regional budget constraint when the regional debt is not too heavy

soft budget constraints and strategic interactions in subnational borrowing evidence from the german states 1975 2005 abstract cooperative federations are usually characterized by the existence of bailout guarantees and intergovernmental transfer schemes this paper explores whether such features of cooperative federations lead to subnational soft budget constraints using panel data from the german states covering the 1975 2005 period the methodology is based on the premise that subnational governments borrowing will exhibit vertical and horizontal strategic interactions if they operate under soft budget constraints therefore a test for strategic interactions in subnational borrowing can be used to infer whether a cooperative federation like germany is susceptible to soft budget constraints the results suggest that state borrowing in germany exhibited horizontal but not vertical interactions during the time frame of the analysis this indicates i that german states faced soft budget constraints and ii that they were more concerned about the likelihood of a bailout than about its volume

when starting with the most expensive option makes sense optimal timing cost and sectoral allocation of abatement investment this paper finds that it is optimal to start a long term emission reduction strategy with significant short term abatement investment even if the optimal carbon price starts low and grows progressively over time moreover optimal marginal abatement investment costs differ across sectors of the economy it may be preferable to spend 25 dollars to avoid the marginal ton of carbon in a sector where abatement capital is expensive such as public transportation or in a sector with large abatement potential such as the power sector than 15 dollars for the marginal ton in a sector with lower cost or lower abatement potential the reason distinct from learning spillovers is that reducing greenhouse gas emissions requires investment in long lived abatement capital such as clean power plants or public transport infrastructure the value of abatement investment comes from avoided emissions but also from the value of abatement capital in the future the optimal levelized cost of conserved carbon can thus be higher than the optimal carbon price it is higher in sectors with higher investment needs those where abatement capital is more expensive or sectors with larger abatement potential we compare our approach to the traditional abatement cost curve model and discuss implications for policy design

a theory of interregional tax competition a general equilibrium model is constructed to study tax competition where local governments compete for capital by holding down property tax rates and public expenditure levels an exact definition of tax competition is provided and both the existence and nonexistence of tax competition are shown to be theoretically possible it is argued however that tax competition must occur under empirically reasonable conditions inefficiency in public production is also explicitly modeled the amount of capital used to produce a given level of public service output is shown to be greater than that which is required to minimize costs evaluated at the prices facing private firms

endogenous implementation of technology gap in energy optimization models a systematic analysis within times g5 model evaluation of global diffusion potential of learning technologies and their timely specific cost development across regions is always a challenging issue for the future technology policy preparation further the process of evaluation gains interest especially by endogenous treatment of energy technologies under uncertainty in learning rates with technology gap across the regions in global regional cluster learning approach this work devised implemented and examined new methodologies on technology gaps a practical problem using two broad concepts of knowledge deficit and time lag approaches in global learning applying the floor cost approach methodology the study was executed in a multi regional technology rich and long horizon bottom up linear energy system model on the integrated markal efom system times framework global learning selects highest learning technologies in maximum uncertainty of learning rate scenario whereas any form of technology gap retards the global learning process and discourages the technologies deployment time lag notions of technology gaps prefer heavy utilization of learning technologies in developed economies for early reduction of specific cost technology gaps of any kind should be reduced among economies through the promotion and enactment of various policies by governments in order to utilize the technological resources by mass deployment to combat ongoing climate change

measuring the value of induced technological change in this paper we analyze the value of induced technological change itc for cutting the costs of reaching climate stabilization targets using techniques from the tax burden literature first itc is valuable as it increases the elasticity of emissions with respect to carbon prices and thereby it decreases the burden associated with an enforced emission reduction second under itc emission abatement may generate a positive learning dividend when the social value of the induced change in learning exceeds its costs we discuss under which assumptions we expect itc to turn out a valuable feature or not we also carry out a numerical analysis with two models one focusing on energy savings the other focusing on energy transition the models suggest that both the decreased carbon tax burden and the learning dividend gain can be substantial compared to the costs of abatement without itc

do deployment policies pick technologies by not picking applications a simulation of investment decisions in technologies with multiple applications abstract the role of deployment policies that aim to foster technological change has grown considerably especially in the fields of energy and climate however recent research has shown that the adoption of deployment policies carries the potential of locking in the technology that is most cost effective at the point of policy introduction but may be inefficient in the long term the present paper contributes to the emerging literature on the role of deployment policies in creating path dependency and eventually technology lock in while previous studies focused on the relationship between lock in and the technology specificity of deployment policies this paper introduces a new factor the existence of multiple applications for a technology we argue that this factor is highly relevant for technological lock in and should be considered by policy makers to support our argument we simulate the competition among four stationary battery technologies across energy system applications in an investment simulation model this simulation shows that the degree of competition among technologies differs strongly across applications which corresponds with a highly varying lock in probability hence selecting applications in deployment policies very likely corresponds to selecting technologies we discuss the implications of these results for both policy makers and for the academic debate on deployment policies and technological lock in as well as on technology assessment and governance more generally based on the notion that policies can have different technology specificity levels we develop the idea of the application specificity of policies and provide examples of currently enacted deployment policies that vary in terms of their technology and application specificity

how responsive is business capital formation to its user cost an exploration with micro data abstract the response of business capital formation to its user cost is critical to evaluating tax reform deficit reduction and monetary policy evidence for a substantial user cost elasticity however is sparse most evidence has been based on aggregate data although several recent studies with firm level data report substantial effects with a particularly rich micro dataset containing over 26 000 observations this paper explores what can be learned about the user cost elasticity while the results depend to some extent on the specification and econometric technique various diagnostics lead us to prefer a precisely estimated but small elasticity of approximately 0 25 this paper is dedicated to the memory of robert eisner who labored early and ably on uncovering the determinants of investment spending and highlighting the importance of the question found in the title of this paper

the market for tradable ghg permits under the kyoto protocol a survey of model studies abstract this paper gathers results from 25 models of the market for tradable greenhouse gas ghg emission permits under the kyoto protocol due to diverging projections of emissions growth and different modeling approaches the model results differ substantially the average market volume is approximately 17 and 33 billion usd under global trading and annex b trading respectively including non carbon ghg lowers compliance costs and permit prices in the absence of the us permit demand roughly equals hot air from the former soviet union these countries can increase their revenues from selling permits by restricting supply which raises the permit price

the dynamics of municipal fiscal adjustment abstract the dynamic fiscal policy adjustment of local jurisdictions is investigated empirically using a panel of more than 1000 u s municipalities over a quarter of a century distinguishing own source revenue grants expenditures and debt service the analysis is carried out using a vector error correction model which takes account of the intertemporal budget constraint the results indicate that a large part of the adjustment in response to fiscal imbalances takes place by offsetting changes in future expenditures in addition the results show that fiscal imbalances are financed to a significant extent by subsequent changes in grants decomposition of the sample according to average city population reveals that the basic pattern of fiscal adjustment is robust although intergovernmental grants play a much more pronounced role in maintaining budget balance for large cities

a review of uncertainties in technology experience curves abstract the use of log linear experience curves or learning curves relating reductions in the unit cost of technologies to their cumulative production or installed capacity has become a common method of representing endogenous technical change in energy economic models used for policy analysis yet there are significant uncertainties in such formulations whose impact on key model results have been insufficiently examined or considered this paper reviews the major types of uncertainty in log linear experience curves and their effect on projected rates of cost reduction uncertainties are found not only in the learning rate parameter of a log linear model but also in the functional form that determines the shape of an experience curve evidence for alternative forms such as an s shaped curve is reviewed along with case studies that demonstrate the uncertainties associated with cost increases during early commercialization of a technology a phenomena that is widely recognized but rarely quantified or incorporated in learning models additional factors discussed include the effects of learning discontinuities institutional forgetting and the influence of social economic and political factors we then review other models of causality which aim to improve modelers ability to explain and predict the influence of other underlying processes that contribute to technology cost reductions in addition to learning ignoring other types of underlying mechanisms can create a false sense of precision and overestimate the true contribution of learning currently however uncertainties in such multi factor models remain large due to the difficulties of estimating key parameters such as private sector r d investments and extending models of a specific technology to a broader suite of technologies and cost projections pending the development and validation of more robust models of technological change we suggest ways to significantly improve the characterization and reporting of current learning model uncertainties and their impacts on the results of energy economic models to help reduce the potential for drawing inappropriate or erroneous policy conclusions

innovation policy for directing technical change in the power sector this paper discusses policy instruments for redirecting technical change within the electricity sector to mitigate climate change first we unravel the mechanism behind directed technical change explaining why markets may underprovide innovations in expensive renewable technologies in comparison to innovations in energy efficient fossil fuel generators subsequently we characterize technical change in electricity generation technologies stressing the heterogeneity of knowledge spillovers both within and between clean electricity generation technologies we argue that there exists a rationale for a portfolio approach to innovation in the electricity sector i e optimal innovation policies are neither fully generic nor fully specific and they need to be adapted in response to new information learned by the government the existing innovation literature does not however provide a clear cut answer for designing such a policy we compare policy instruments and argue that public r d support to clean technologies either in the form of subsidies or prizes seems to be the prime candidate for implementing non generic innovation policy

optimal carbon taxes for china and implications for power generation welfare and the environment abstract china is expected to constitute about half of the world s emissions between 2010 and 2040 as concerns about climate change intensify the chinese government is poised to commit to a low carbon economy these conditions make china a suitable case in which to study how emission policies impact on energy supply welfare and the environment to achieve this purpose we incorporate abatement technologies into the gtap computable general equilibrium model and show that optimal taxes range between 0 03 for services and 2 02 for manufacturing in most cases simulated tax rates are by far higher than pollution taxes stipulated in the new chinese environmental tax law furthermore despite a decline in output of many sectors including the electricity sector overall welfare gains exist from introducing carbon taxes moreover these taxes reduce environmental pollution by approximately 62 5 in general carbon taxes are insufficient for mitigation in china and due to a coal dominant energy structure implementing these taxes leads to a decline in power generation hence the chinese aggressive investment strategy for renewable electricity technologies as stipulated in its 13th five year plan is understandable

an options approach to investment in a hydrogen infrastructure this paper discusses the investments needed for the introduction of hydrogen as a transport fuel using option theory we develop a model to calculate the value and optimal timing of a first commercial rollout of hydrogen vehicles in a larger area taking japan as a specific example we find that the project is best viewed as an out of the money call option with a small but positive option value we estimate this value at approximately 1 5 billion euros without tax advantages an important finding is that the moment of investment is first and foremost determined by the maturing of the technology by contrast the investment timing is not as much affected by deployment strategy as is frequently thought in particular whether or not the hydrogen retail infrastructure is introduced smoothly does not sensitively influence the investment timing fairly independent of parameter assumptions the project value at the moment of deployment is negative for the retailer and positive for the car manufacturer this implies the need for a negotiated partnership finally we assess various forms of government support e g subsidies or tax cuts looking at the effectiveness of this support spending in relation to the advancement of hydrogen deployment we find again because investment timing is primarily determined by technology maturation that tax incentives are relatively ineffective we are lead to believe that government subsidy for technology development is a more effective means to achieve earlier investment as faster production cost reductions for hydrogen and fuel cell vehicles lead to accelerated investment

the taking of land when should compensation be paid the analysis focuses on the question of whether the payment of compensation for land taken by eminent domain is efficient when the taking decision is independent of land use zero compensation is efficient but full compensation is not when the project decision is no longer independent of land use and can be affected by investor decisions neither compensation rule is generally efficient because of the moral hazard problem with risk averse consumers and risk neutral firms the previous conclusions remain essentially unchanged however when the project decision rule involves a budgetary fiscal illusion additional compensation may be necessary to correct the incentives facing the project decision maker

measuring the temporal dynamics of policy mixes an empirical analysis of renewable energy policy mixes balance and design features in nine countries abstract complex societal or environmental problems require fast and substantial socio technical transitions for instance in the case of climate change these transitions need to take place in the energy transport and several industry sectors to induce and accelerate such transitions numerous policy interventions are required which interact with each other in policy mixes while several conceptual studies on policy mixes have been published recently there is very little empirical research apart from single case or small n studies it has been prominently argued that the debate about policy mixes has reached an impasse partly due to this lack of empirical work this paper addresses this gap by providing a first analysis of the temporal dynamics of complex policy mixes to do so we develop a conceptualization and measurement of policy mix balance across instrument types as well as policy mix design features in the form of intensity as a general and technology specificity as a technology focused design feature this allows us to answer the question how temporal dynamics of policy mixes differ between countries regarding their balance and design features our measurement approach is developed bottom up i e policies are assessed individually and then aggregated systematically at the policy mix level this enables overcoming the dependent variable problem in the study of policy change i e the problem of measuring policy output more specifically we develop a comparative dataset of 522 renewable energy policies in nine oecd countries our analysis shows that countries policy mix dynamics vary strongly regarding some variables e g technology specificity but less regarding others e g balance as a validity check we also test the effects of these mix dynamics on policy outcome in the form of renewable energy technology diffusion we reflect our findings in light of the theoretical debates around policy mixes and policy design and discuss how our results provoke an agenda for the new generation of research on policy mixes we specifically discuss avenues for future research with a particular focus on the politics of policy mixes

the dynamic impact of unilateral environmental policies this paper builds a two country two sector polluting nonpolluting trade model with directed technical change examining whether unilateral environmental policies can ensure sustainable growth the emission rate of the polluting sector depends on its relative use of a clean and a dirty input a unilateral policy combining clean research subsidies and a trade tax can ensure sustainable growth while unilateral carbon taxes alone increase innovation in the polluting sector abroad and generally cannot ensure sustainable growth relative to autarky and exogenous technical change respectively trade and directed technical change accelerate environmental degradation either under laissez faire or with unilateral 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 knowledge spillovers have the potential to reduce the otherwise large welfare costs of restricting policy to onecountry

mergers in fiscal federalism this paper analyzes mergers of regions in a two tier setting with both horizontal and vertical tax competition the merger of regions induces three eects on regional and local tax policies which are transmitted both horizontally and vertically i an alleviation of tax competition at the regional level ii a rise in the regional tax base and iii a larger internalization of tax externalities generated by cities it is shown that the merger of regions increases regional tax rates while decreasing local tax rates this nash equilibrium with mergers is then compared with the nash equilibrium with coalitions of regions

the impressive contribution of canadian economists to fiscal federalism theory and policy the study of fiscal federalism has been central to the research of canadian economists since the rowell sirois report to mark the 50th anniversary of the founding of the canadian economics association it is fitting to take stock of their contributions we focus on the period since 1982 and emphasize the main scholarly publications of an inclusive array of canadian economists and economists in canadian universities our attention is devoted to applications in the context of federal and provincial governments setting aside related issues in municipal government finance we briefly discuss instances where the fiscal federalism literature has informed policy debates including through policy research institutes government commissions and international organizations la contribution impressionnante des economistes canadiens a la theorie et a la politique du federalisme fiscal l etude du federalisme fiscal a ete un element central de la recherche des economistes canadiens depuis la commission rowell sirois au moment de celebrer le 50eme anniversaire de la fondation de l association canadienne d economique le moment est approprie pour prendre la mesure de leurs contributions on se concentre sur la periode apres 1982 et on souligne les principales publications savantes d un ensemble inclusif d economistes canadiens et d economistes dans les universites canadiennes une attention particuliere est portee aux applications dans le contexte federal et provincial mettant de cote les enjeux relies a la finance municipale on discute brievement des instances ou la litterature sur le federalisme fiscal a eclaire les debats de politiques publiques y compris a travers les instituts de recherche sur les politiques publiques les commissions gouvernementales et les organisations internationales

technical change and the marginal cost of abatement abstract we address one aspect of the treatment of technical change in the environmental economics literature how technical change impacts the marginal cost of abatement we review a selection of papers that employ a variety of representations of technical change and show that these representations have quite different and sometimes surprising effects on the marginal costs of pollution reductions we argue that these varied representations in fact correspond to a variety of different technology options we then present results indicating that this representation matters the impacts of technical change on the marginal cost of abatement can crucially impact policy analysis

too big or too small a synthetic view of the commitment problem of interregional transfers abstract there is a growing body of literature on the commitment problem of interregional transfers the problem occurs because of an ex post bailout by a central government leading to ex ante adverse incentive consequences for a local government however different models have yielded different economic consequences the local government may be too large overspending and or overborrowing or it may be too small raising less of its own revenue in the presence of interregional spillovers the equilibrium may yield a pareto efficient outcome the present paper aims to synthesize these models developing a simple decentralized leadership model a critical question concerns what decision is made ex ante by the local government namely public expenditure or tax collection with the remaining policy instrument being residual adjusted by ex post transfers we discuss how different scenarios affect the equilibrium outcome

does federalism lead to excessively high taxes the relative strengths of vertical and horizontal tax externalities turn on the balance between the interest responsiveness of the supply of savings and demand for capital the extent to which immobile factors are taxed by the states and the strength of preferences between federal and state expenditures the vertical externality will dominate if the aggregate tax base of the federation is responsible to the state tax instrument tax interactions in federations are more complex than has often been supposed

is there a relationship between public expenditures in energy r d and carbon emissions per gdp an empirical investigation abstract energy innovation plays a crucial role in the reduction of carbon emissions in order to design climate and energy policies that promote the development deployment and diffusion of new energy technologies policy makers not only require a theoretical understanding of the energy innovation system but also empirical evidence of the effects that policy actions have had this paper focuses on public energy r d a traditional and controversial option among the various climate technology policies and empirically analyses its relationship with carbon emissions per gdp i e carbon intensity and its two components energy intensity and the carbon factor evidence of the causality links that have prevailed in 13 advanced economies over the 1980 2004 period has been obtained through dynamic panel models our findings confirm that government r d spending is not sufficient by itself to boost the energy innovation process public energy r d has been successful in improving energy efficiency at country level but it has failed to have a significant impact on the carbon factor and carbon intensity at the same time the formation of energy r d budgets is found to be significantly affected by carbon trends

land acquisition for industrialization and compensation of displaced farmers this paper addresses the question of how farmers displaced by acquisition of agricultural land for the purpose of industrialization ought to be compensated prior to acquisition the farmers are leasing in land from a private owner or local government with a legally mandated sharecropping contract compensation rules affect the decision of the landlord to sell the land ex post to an industrial developer and ex ante incentives of tenants and landlord to make specific investments in agricultural productivity efficiency considerations are shown to require farmers be over compensated in the event of conversion

pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility abstract we examine the non cooperative provision of a pure public good by regional governments in a federation similar to the european union where regional governments are stackelberg leaders and the central government is a stackelberg follower a federation with decentralized leadership the center makes interregional income transfers after it observes the contributions to the pure public good imperfectly mobile workers react to regional and central governments policies by establishing residence in their most preferred region despite the degree of labor mobility we show that the pure public good and interregional transfers are generally allocated efficiently in a federation with decentralized leadership

understanding the soft budget constraint we propose a clarification of the notion of a soft budget constraint a concept widely used in the analysis of socialist transitional and market economies our interpretation is broad enough to embrace most existing approaches to soft budget constraint phenomena and provides a classification of their causes and consequences in light of this interpretation we then review the theoretical literature on the subject and compare it with those on other dynamic commitment problems in economics

on the sources of technological change assessing the evidence this paper uses a selective review of the economic literature on technological change to support four points that are important for interpreting and incorporating technological change into formal models of energy and the environment the review 1 supports the notion that no single source dominates the process of technological change it supports roles for rd 3 indicates that these spillovers are often indirect requiring own industry activities to utilize and 4 indicates that simple experience curve calibrations often used in formal models likely include a range of sources of technological change in addition to learning by doing some of which might not be induced by the sorts of policies typically considered in the climate context

a review of learning rates for electricity supply technologies a variety of mathematical models have been proposed to characterize and quantify the dependency of electricity supply technology costs on various drivers of technological change the most prevalent model form called a learning curve or experience curve is a log linear equation relating the unit cost of a technology to its cumulative installed capacity or electricity generated this one factor model is also the most common method used to represent endogenous technical change in large scale energy economic models that inform energy planning and policy analysis a characteristic parameter is the learning rate defined as the fractional reduction in cost for each doubling of cumulative production or capacity in this paper a literature review of the learning rates reported for 11 power generation technologies employing an array of fossil fuels nuclear and renewable energy sources is presented the review also includes multi factor models proposed for some energy technologies especially two factor models relating cost to cumulative expenditures for research and development r d as well as the cumulative installed capacity or electricity production of a technology for all technologies studied we found substantial variability as much as an order of magnitude in reported learning rates across different studies such variability is not readily explained by systematic differences in the time intervals geographic regions choice of independent variable or other parameters of each study this uncertainty in learning rates together with other limitations of current learning curve formulations suggests the need for much more careful and systematic examination of the influence of how different factors and assumptions affect policy relevant outcomes related to the future choice and cost of electricity supply and other energy technologies

technological learning in energy environment economy modelling a survey abstract this paper aims at providing an overview and a critical analysis of the technological learning concept and its incorporation in energy environment economy models a special emphasis is put on surveying and discussing through the so called learning curve both studies estimating learning rates in the energy field and studies incorporating endogenous technological learning in bottom up and top down models the survey of learning rate estimations gives special attention to interpreting and explaining the sources of variability of estimated rates which is shown to be mainly inherent in r d expenditures the problem of omitted variable bias the endogeneity relationship and the role of spillovers large scale models survey show that despite some methodological and computational complexity related to the non linearity and the non convexity associated with the learning curve incorporation results of the numerous modelling experiments give several new insights with regard to the analysis of the prospects of specific technological options and their cost decrease potential bottom up models and with regard to the analysis of strategic considerations especially inherent in the innovation and energy diffusion process in particular the energy sector s endogenous responses to environment policy instruments top down models

bending the learning curve abstract the aim of this paper is to improve the application of the learning curve a popular tool used for forecasting future costs of renewable technologies in integrated assessment models iams first we formally discuss under what assumptions the traditional ols estimates of the learning curve can deliver meaningful predictions in iams we argue that the most problematic of them are the absence of any effect of technology cost on its demand reverse causality and the ability of iams to predict all determinants of cumulative capacity next we show that these assumptions can be relaxed by modifying the traditional econometric method used to estimate the learning curve the new estimation approach presented in this paper is robust to the two problems identified but preserves the reduced form character of the learning curve finally we provide new estimates of learning curves for wind turbines and pv technologies which are tailored for use in iams our results suggest that the learning rate should be revised upward for solar pv our estimate of learning rate for wind technology is almost the same as the traditional ols estimates

the effect of local and global learning on the cost of renewable energy in developing countries high upfront costs are a critical barrier for investments in clean infrastructure technologies in developing countries this paper uses a case study of thailand s electricity sector to create realistic estimates for the relative contributions of local and global technological learning to reducing these cost in the future and discusses implications of such learnings for international climate policy for six renewable electricity technologies we derive estimates for the share of locally and globally sourced goods and services and analyze the effects of local and global learning during the implementation of thailand s renewable energy targets for 2021 our results suggest that in aggregate the largest potential for cost reduction lies in local learning this finding lends quantitative support to the argument that the conditions enabling local learning such as a skilled workforce a stable regulatory framework and the establishment of sustainable business models have a more significant impact on cost of renewable energy in developing countries than global technology learning curves the recent shift of international support under the united nations framework convention on climate change towards country specific technology support is therefore promising however our results also show that the relative importance of local and global learning differs significantly between technologies and is determined by technology and country characteristics this suggests that international support need to consider both the global perspective and local context and framework conditions in order to reap the full benefits of technological learning across the wide range of clean technologies

on the land assembly problem abstract we consider a segment of the land market where the entire available land stock is needed for the realization of some indivisible development project the stock is shared by several landholders who either collude or negotiate independently with the developer over the prices of their lots investigating the price setting behavior of the landowners and the optimal strategy of the developer we show that landowners set more moderate prices under collusion than when acting independently in the latter case the individual asking price falls with the size of the land share and the total price increases with the number of landowners as regards the optimal strategy we find that the developer will in general not offer the lowest price he expects to be accepted by the landowners

carbon prices for the next hundred years this paper examines the socially optimal pricing of carbon emissions over time when climate change impacts are unknown potentially high consequence events the carbon price tends to increase with income but learning about impacts or their absence decouples the carbon price from income growth the price should grow faster than the economy if the past warming is not substantial enough for learning the true long run social cost it grows slower than the economy as soon as the warming generates information about events that could have arrived but have not done so a quantitative assessment shows that the price grows roughly at the rate of the economy for the next 100 years

federalism and the soft budget constraint the government s incentives to bail out inefficient projects are determined by the trade off between political benefits and economic costs the latter depending on the decentralization of government two effects of federalism are derived first fiscal competition among local governments under factor mobility increases the opportunity costs of bailout and thus serves as a commitment device the competition effect second monetary centralization together with fiscal decentralization induces a conflict of interests and thus may harden budget constraints and reduce inflation the checks and balance effect the authors analysis is used to interpret china s recent experience of transition to a market economy copyright 1998 by american economic association

taking the bite out of fiscal competition regions can benefit by offering infrastructure services that are differentiated by quality thus segmenting the market for industrial location regions that compete on infrastructure quality have an incentive to increase the degree of differentiation between them this places an upper bound on the number of regions successfully able to participate in the location market and limits the dissipation of regional surplus through tiebout competition it indicates a process of fiscal agglomeration through which regional concentrations arise which does not depend on the circular causation underlying much of the recent literature on economic geography

optimal emission taxes for full internalization of environmental externalities abstract the present study proposes a set of optimal emissions fees that could be used to reduce the damages caused by industrial pollution the approach we use allows for the setting of pollution taxes at their economically appropriate level in particular tax rates are computed for china india and 19 sub saharan african countries all other world regions are grouped according to income level such as low income lower middle income upper middle income and high income economies our results show that constructed optimal pollution taxes range as high as 2 9 per 1 dollar of output for heavy manufacturing in the high income countries and as low as 0 01 in the service sectors of the low income countries these results show that a full internalization of the damages in each sector calls for raising the tax rates in some sectors and lowering them in others

second best renewable subsidies to de carbonize the economy commitment and the green paradox climate change must deal with two market failures global warming and learning by doing in renewable energy production the first best policy consists of an aggressive renewables subsidy in the near term and a gradually rising and falling carbon tax given that global carbon taxes remain elusive policy makers might have to rely on a second best subsidy only with credible commitment the second best subsidy is higher than the social benefit of learning to cut the transition time and peak warming close to first best levels at the cost of higher fossil fuel use in the short run weak green paradox without commitment the second best subsidy is set to the social benefit of learning it generates smaller weak green paradox effects but the transition to the carbon free takes longer and cumulative carbon emissions are higher under first best and second best with pre commitment peak warming is 2 1 2 3 circ c under second best without commitment 3 5 circ c and without any policy 5 1 circ c above pre industrial levels not being able to commit yields a welfare loss of 95 of initial gdp compared to first best being able to commit brings this figure down to 7

technological change and the timing of mitigation measures we use a coupled carbon cycle and energy systems engineering model to analyze the future time path of carbon emissions under an illustrative co2 concentration stabilization limit of 550 ppm our findings confirm the emission pattern as found by wre global emissions rise initially pass through stabilization in order to decline in the second half of the 21st century we show that for a given co2 concentration target emission trajectories within an intertemporal optimization framework depend mainly on two factors the discount rate and the representation of technological change as either static or dynamic we obtain a similar near term emission time path as wre when using a model with static technology and a discount rate of 7 we obtain a trajectory with lower emissions in the near term when using a lower discount rate and or treating technology dynamics endogenously in the model we briefly outline a model that endogenizes technological change through learning curves we then compare differences in emission trajectories between alternative model formulations of technological change they are sufficiently small as to be of secondary importance when compared to treating co2 concentration stabilization as an inter temporal optimization problem or not whereas our results confirm the computational results of wre we arrive nonetheless at different policy conclusions if long term emission reduction is the goal we cannot follow business as usual even in the short term action needs to start now action does not necessarily mean aggressive short term emission reductions but rather enhanced r d and technology demonstration efforts that stimulate technological learning these are the necessary preconditions that long term reduction targets can be met with improved technology and at costs lower than today we close by pointing out two further critical issues uncertainty and the possible mismatch between the world of economic models and that of climate policy

learning by doing and the costs of a backstop for energy transition and sustainability we assess the impact of being able to substitute an unlimited but costly energy substitute like wind solar for a non renewable resource like oil coal in a model of sustainable growth the prospects for sustainability on the optimal path depend crucially on the costs of this substitute furthermore the poorer a country measured in terms of capital stock at a given point in time the later it should switch to the renewable substitute and the more likely it will be unsustainable taking learning by doing in account we find that this leads to an earlier switching time but does not guarantee sustainability

transparency complementarity and holdout this paper characterizes the conditions under which holdout i e bargaining inefficiency may or may not be significant in a two sided one buyer many seller model with complementarity we address this problem in a very general setup with a bargaining protocol that is symmetric and allows for both publicly observable as well as secret offers and a technology that allows for variable degrees of complementarity the central insight is that the transparency of the bargaining protocol formalized by whether offers are publicly observable or secret as well as the extent of complementarity play a critical role in generating efficiency even with perfect complementarity holdout seems to be largely resolved whenever the bargaining protocol is public but not if it is secret further irrespective of the bargaining protocol holdout is resolved if the marginal contribution of the last seller is not too large

tax competition in a fiscal union with decentralized leadership this paper examines capital tax competition in the presence of an interstate transfer policy without federal commitment lack of commitment implies that local tax policy is chosen prior to federal transfers the paper s main result is that ex post federal policy neutralizes horizontal fiscal externalities insulating tax policy from capital mobility federal policy however introduces a new source of inefficiency unrelated to tax competition specifically ex post transfer payments prove to be equivalent to an interstate revenue sharing system which may render federal intervention in the presence of fiscal externalities welfare deteriorating relative to tax competition

r d investment strategy for climate change abstract the economic costs of stabilizing greenhouse gas concentrations over the coming century depend critically on the development of new technologies in the energy sector our research and development r d investment strategy is the control variable for technology availability this paper proposes an analytic framework for determining optimal r d investment allocation and presents some numerical results to demonstrate the implementation of the methodology the value of technological advance in three targeted areas fossil based generation renewables and carbon capture and storage is represented by the increase in expected welfare in the presence of an emissions policy constraint of initially uncertain stringency r d expenditure increases the probability of advance optimal investment is determined by its relationship with success probability which is assumed to exhibit decreasing returns to scale relative to the value of success while the numerical results are speculative the paper offers insights into the nature of an optimal technology strategy for addressing climate change

resistance redistribution and investor friendliness abstract poor communities sometimes resist private investment and destroy economic surplus even if the government has the willingness and ability to redistribute we interpret such acts of resistance as demands for redistribution destruction contains credible information about how the affected group values surplus and such information is used by the government in implementing the optimal redistribution policy the extent of destruction is increasing in the extent of political marginalization of the affected group resistance not only destroys economic surplus it also mutes the investor s incentives to create surplus the government uses a tax subsidy on the investor to maximize weighted social surplus and we show that the possibility of destruction may force the government to be too soft in its negotiations with the investor we discuss several policy instruments that have the potential to improve welfare these include compensation floor for the affected group legal or financial protection for the investor and licensing fees for the investor

second generation fiscal federalism the implications of fiscal incentives abstract first generation fiscal federalism fgff studies the performance of decentralized systems under the assumption of benevolent social planners second generation fiscal federalism sgff studies performance based on the fiscal and political incentives facing subnational officials the paper focuses on three aspects of sgff first it considers the design of intergovernmental transfers while fgff emphasizes correcting vertical and horizontal equity sgff emphasizes the importance of fiscal incentives for producing local economic prosperity sgff extends fgff approaches by showing how non linear transfer systems can produce both equalization and high marginal fiscal incentives to produce local economic growth second the paper raises the fiscal incentive approach showing how different tax systems produce different fiscal incentives for political officials to choose policies third the paper discusses the interaction of democracy and fiscal federalism

integrated assessment of global climate change with learning by doing and energy related research and development this paper presents a small scale version of an integrated assessment model iam of global climate change which is based on a global regionally differentiated computable general equilibrium cge model with endogenous technological change this model can be viewed as a basic framework for analyzing a broad range of economic issues related to climate change in particular since technological change is represented in two ways on the one hand there is learning by doing lbd in non fossil energy supply technologies and on the other hand there is research and development r d driven energy saving technical progress in production computational experiments are added for illustrating the role of technological innovation in a world both with and without cooperation in the solution of the global climate problem

a climate change policy induced shift from innovations in carbon energy production to carbon energy savings abstract we develop an endogenous growth model with capital labor and carbon energy as production factors and three technology variables that measure accumulated innovations for carbon energy production carbon energy savings and neutral growth all markets are complete and perfect except for research for which we assume that the marginal social benefits exceed the marginal private benefits by factor four the model constants are calibrated so that the model reproduces the relevant global trends over the 1970 2000 period the model contains a simple climate module and is used to assess the impact of induced technological change itc for a policy that aims at a maximum level of atmospheric co2 concentration 450 ppmv itc is shown to reduce the required carbon tax by more than a factor 2 and to reduce costs of such a policy by half when we do not constrain aggregate r d expenditures to benchmark levels costs are further reduced numerical simulations show that knowledge accumulation shifts from energy production to energy saving technology we discuss reasons for differences between our results and earlier results reported in the literature

overlapping soft budget constraints abstract our paper identifies a potential problem with decentralization at a time when its virtues are widely extolled we show that responsibility for equalization at multi levels within a decentralized federation creates an overlapping equalization policy that can worsen fiscal discipline contrary to qian and roland 1998 we also show in our set up that fiscal competition among regional rescuers does not act as a commitment device to harden the local budget constraint

endogenous technological change in climate change modelling this article investigates the impact on optimal co2 abatement and carbon tax levels of introducing endogenous technological change in a macroeconomic model of climate change we analyse technological change as a function of cumulative capacity as incorporated recently in energy systems models our calculations confirm that including endogenous innovation implies earlier emission reduction to meet atmospheric carbon concentration constraints however the effect is stronger than suggested in the literature moreover the development of non fossil energy technologies constitutes the most important opportunity for emission reductions optimal carbon tax levels reducing fossil energy use are lower than usually advocated