Technological Change in Economic Models of Environmental Policy: A Survey

This paper provides an overview of the treatment of technological change in economic models of environmental policy. Numerous economic modeling studies have confirmed the sensitivity of mid- and long-run climate change mitigation cost and benefit projections to assumptions about technology costs. In general, technical progress is considered to be a noneconomic, exogenous variable in global climate change modeling. However, there is overwhelming evidence that technological change is not an exogenous variable but to an important degree endogenous, induced by needs and pressures. Hence, some environmenteconomy models treat technological change as endogenous, responding to socio-economic variables. Three main elements in models of technological innovation are: (i) corporate investment in research and development, (ii) spillovers from R&D, and (iii) technology learning, especially learning-by-doing. The incorporation of induced technological change in different types of environmental-economic models tends to reduce the costs of environmental policy, accelerates abatement and may lead to positive spillover and negative leakage

Climate change: the effects of personal beliefs and scientific uncertainty

The potential consequences of global climate change are disastrous. The potential impact of emission control programs is enormous, and the benefits of such action are highly uncertain.</p

A free lunch at higher CAFE? A review of economic, environmental and social benefits

Pressure has been increasing to raise the corporate average fuel economy (CAFE) standard. Some researchers assert many benefits from increasing CAFE, from less dependence on imported petroleum to lower urban ozone. We find that fuel savings from increasing CAFE are subject to diminishing returns, with little or no effect on urban air pollution, and a less than proportional reduction in greenhouse gas emissions. Higher CAFE reduces safety, unless offsetting steps are taken. Should the public demand moderately higher fuel efficiency, the government should raise the CAFE standard and gasoline prices. Given current technology, substantial increases in CAFE have potential costs, and do not appear to offer significant benefits as contended.</p