“ THE ENVIRONMENT AND DIRECTED TECHNICAL CHANGE”

Analizing International seminar paper

1.      Abstrak

“This paper introduces endogenous and directed technical change in a growth model with environmental constraints. A unique final good is produced by combining inputs from two sectors. One of these sectors uses “dirty” machines and thus creates environmental degradation. Research can be directed to improving the technology of machines in either sector. We characterize dynamic tax policies that achieve sustainable growth or maximize intertemporal welfare. We show that: (i) in the case where the inputs are sufficiently substitutable, sustainable long-run growth can be achieved with temporary taxation of dirty innovation and production; (ii) optimal policy involves both “carbon taxes” and research subsidies, so that excessive use of carbon taxes is avoided; (iii) delay in intervention is costly:

the sooner and the stronger is the policy response, the shorter is the slow growth transition phase; (iv) the use of an exhaustible resource in dirty input production helps the switch to clean innovation under laissez-faire when the two inputs are substitutes. Under reasonable parameter values and with sufficient substitutability between inputs, it is optimal to redirect technical change towards clean technologies immediately and optimal environmental regulation need not reduce long-run growth.”

Analysis:

This paper explain that to reduce environmental demage due to technical changes, it is necessary to substitute between “Dirty” input and “Clean” input. Therefore, we need an long-term optimal environmental regulation.

2.      Discussion :

This paper istalking about “ THE ENVIRONMENT AND DIRECTED TECHNICAL CHANGE”

3.      Analysis of paragraph  :

-          Paragraph 1 contains  A satisfactory framework for the study of the costs and benefits of different environmental policies must therefore include at its centerpiece the endogenous response of different types of technologies to proposed policies.

-          Paragraph 2 contains a framework highlights the central roles played by the market size and the price effects on the direction of tehnical change.

-          Paragraph 3 contains a Without intervention, the economy would rapidly head towards an environmental disaster, in particular, because the market size effect and the initial productivity advantage of dirty inputs would direct innovation and production to that sector, contributing to environmental degradation.

-          Paragraph 4 Contains a model also nests the Stern/Al Gore and Greenpeace answers.

-          Paragraph 5 contains a even though a carbon tax would by itself discourage research in the dirty sector.

4.      Conclution :

This search result recommends therefore, an optimal regulastion is neended to reduce environmental degradation.

5.      Paper analyzed :  “http://su.diva-portal.org/smash/get/diva2:345160/FULLTEXT01”