This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Outline for Today • Incentives for technological change under alternative policies • Examples in the context of climate change - theory is from the end of Chapter 9 • Start transportation section • Return midterms Technology • Creating incentives for new, cleaner, technologies is key to reducing the costs of carbon abatement • One way is to directly subsidize new technology (e.g. the idea behind the current Solyndra scandal) • Policy (e.g. a carbon tax) can also provide a boost to new technologies (for example solar, which allows people to avoid paying a carbon tax) • We can apply the models of various different policies from this class to learn something about which ones provide greater incentives for new technology Application of the Model • Consider the standard model of increasing marginal costs for several Frms, and a choice of pollution taxes or cap-and-trade • Three identical Frms, MC for each = X • Xmax for each = 9 • MB Fxed at 3 • Argue that in a certain world, the efFcient tax of 3 is equivalent to the government auctioning 18 tradable permits • Argue that the equivalence in this case holds both on efFciency and distribution Application of the Model...
View Full Document
- Spring '09
- Economics, Pigovian tax, externalities model