Some effects of a decreasing elasticity of substitution between clean and dirty energy on optimal climate policy

Crawford School of Public Policy | Centre for Applied Macroeconomic Analysis

Event details


Date & time

Thursday 23 May 2019


Seminar Room 1 , Level 1, Stanner Building 37, Lennox Crossing, ANU


Tony Wiskich, PhD Student, CAMA


Rossana Pinto
61 2 61258108

Using a climate model with endogenous technology, this seminar investigates the implications of a decreasing elasticity of substitution between clean and dirty energy as the share of clean energy rises. Both taxes and subsidies are needed for optimum policy. A decreasing elasticity increases the initial optimal tax on dirty energy and marginally lowers subsidies required to direct technical change towards clean energy. In the presence of a carbon tax, consumption can decrease as clean productivity rises, and a drop in elasticity can boost consumption. When subsidies have a distortionary cost, optimal taxes are increased by an amount proportional to the cost and roughly independent of the elasticity of substitution and the relative productivities of clean and dirty technologies.

Tony Wiskich is a PhD scholar at ANU and doctoral student associate for the Centre for Applied Macroeconomic Analysis. He worked as an economist in the public and private sectors for a decade. His research interests include: optimal carbon prices under uncertainty of climate tipping; a decreasing elasticity between clean and dirty inputs; productivity spillovers from the rise of China; and the consequences of diminishing comparative advantage between countries.

The CAMA Macroeconomics Brown Bag Seminars offer CAMA speakers, in particular PhD students, an opportunity to present their work in progress in front of their peers, and reputable visitors to showcase their work.

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