This paper studies the implications for climate policy of the interactions between environmental and knowledge externalities. Using a numerical analysis performed with the hybrid integrated assessment model WITCH, extended to include mutual spillovers between the energy and the nonenergy sector, we show that the combination between environmental and knowledge externalities provides a strong rationale for implementing a portfolio of policies for both emissions reduction and the internalisation of knowledge externalities. Moreover, we show that implementing technology policy as a substitute for stabilisation policy is likely to increase global emissions.

• issn: C72, H23, Q25, Q28, O31, O41, Q54.

• European Institute on Economics and the Environment

• Economic analysis of Climate Impacts and Policy Division

Authors

• Emanuele Massetti
• Lea Nicita