Webinar – Endogenous Abatement Technology
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Webinar – Endogenous Abatement Technology

Event details
December 17, 2021
3:00 pm - 4:30 pm
Online Event
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Speaker: Ghassane Benmir, London School of Economics
Valentina Bosetti, Bocconi University and RFF‐CMCC European Institute on Economics and the Environment (EIEE), Centro Euro‐Mediterraneo sui Cambiamenti Climatici
In this paper, we first explore empirical evidence on i) the role the ETS carbon pricing system plays in emissions reduction at the Euro Zone (EZ) level, and ii) fiscal and macro-financial drivers of green innovation. We use macro time series data from EZ and US as well as panel data from the EZ, receptively. We find that the ETS price plays a significant role in emissions reduction, as well as in steering green innovation. However, above a certain level, it negatively impacts green research and development (R&D), whereas long-term loans help boost green R&D. Second, to investigate the role financial policy could play in stimulating green R&D, we build a general equilibrium model where we show how green innovation could help achieve the net-zero target at lower output costs compared to fiscal carbon policies. We then expand the model to account for both financial intermediaries and endogenous green growth, the latter of which implies increasingly efficient abatement. Using Bayesian techniques, we first estimate the model and then construct counterfactual policy implementation scenarios, where we show that financial subsidies, macroprudential policies, and monetary policy differently aspect the path of the trend growth in green innovation, and that they all have the same pro-cyclical dynamics. Finally, we investigate the net-zero emissions target under the three above-mentioned policies in order to assess their efficacy.