Research subsidies with and without carbon prices

With climate change policy on the back burner, Ezra Klein, back in July, interviewed Michael Shellenberger about whether subsidies for research and development were a good substitute, or at least a politically viable substitute, for cap-and-trade or carbon taxes.

There's some interesting economic theory of the second best that sits beneath this question (see the bottom of the linked post).

Others are now getting on the bandwagon.  The other day David Leonardt was channeling Michael Greentone, with a follow up channeling Nathaniel KohaneTyler Cowen also seems intrigued by the idea.

It's the kind of policy that might actually find some bipartisan support.  Although big oil and coal probably wouldn't like this any better than cap and trade.

I'm sure a dozen or so theoretical environmental economists are busy working on just this topic.


  1. Acemoglu gave a talk on this at the latest WCERE talk. It was thought provoking. You have to make the assumption that research into "clean" energy is not transferable to research into "dirty" energy which is likely ridiculous but has no empirical backing (that I know of) so I'm not sure how smart it is to base policy on this idea.


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