The Environment and Directed Technical Change.

  title={The Environment and Directed Technical Change.},
  author={Daron Acemoglu and Philippe Aghion and Leonardo Bursztyn and David H{\'e}mous},
  journal={The American economic review},
  volume={102 1},
This paper introduces endogenous and directed technical change in a growth model with environmental constraints. The final good is produced from "dirty" and "clean" inputs. We show that: (i) when inputs are sufficiently substitutable, sustainable growth can be achieved with temporary taxes/subsidies that redirect innovation toward clean inputs; (ii) optimal policy involves both "carbon taxes" and research subsidies, avoiding excessive use of carbon taxes; (iii) delay in intervention is costly… CONTINUE READING
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