Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/272008 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10364
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We consider technology choices between green and brown technologies by firms. We use insights from complexity theory and also take account of true uncertainty in designing public policy. The green technology offers relatively higher returns to scale from adoption, and there are type-contingent differences among firms in their suitability for the green technology. We show that the long-run outcome is unpredictable despite there being no fundamental uncertainty in the model; small accidents of history can lead to large effects; and the final outcome is an 'emergent property' of the system. We describe the role of taxes and subsidies in facilitating adoption of the green technology. We also consider issues of the conflict between optimal Pigouvian taxes and green technology adoption; optimal temporal profile of subsidies; and the desirability of an international fund to provide technology assistance to poorer countries. Despite the simplicity of the framework, several novel results are demonstrated that typically do not arise in the standard analysis of the problem.
Subjects: 
technology choice
climate change
complexity
lock-in effects
increasing returns
green subsidies
public policy
Pigouvian taxes
stochastic dynamics
JEL: 
D01
D21
D90
H32
Document Type: 
Working Paper
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