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Title:
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Impacts of CO2 taxes in an economy with niche markets and learning-by-doing
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Author(s):
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Published by:
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Publication date:
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ECN
Policy Studies
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1-4-2004
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ECN report number:
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Document type:
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ECN-RX--04-110
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Article (scientific)
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Number of pages:
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0
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Published in: Environmental and Resource Economics, 28, 2004, pp. 367-394. (Springer), , , Vol., p.-.
Abstract:
In this paper, we analyse the impact of carbon taxes on emission levels,when niche markets exists for new carbon-free technologies, and when
these technologies experience "learning-by-doing" effects. For this
purpose, a general equilibrium model has been developed, DEMETER, that
specifies two energy technologies: one based on fossil fuels and one
on a composite of carbon-free technologies. Initially, the carbon-free
technology has relatively high production costs, but niche markets ensure
positive demand. Learning-by-doing decreases production costs, which
increases the market share, which in turn accelerates learning-by-doing,
and so forth. This mechanism allows a relatively modest carbon tax,
of about 50 US$/tC, to almost stabilise carbon emissions at their 2000
levels throughout the entire 21st century. Sensitivity analysis shows
that the required carbon tax for emission stabilisation crucially depends
on the elasticity of substitution between the fossil-fuel and carbon-free
technology.
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