Human Capital, Innovation, and Climate Policy: An Integrated Assessment

Transcription

1 Fodazio Ei Erico Mai Workig Paprs Huma Capial Iovaio ad Clima Policy: A Igrad Assssm Carlo Carraro Uivrsiy of Vic Fodazio Erico Mai CEP CESifo ad CMCC carlo.carraro@fm.i Erica Cia Fodazio Erico Mai ad CMCC Massimo Tavoi Fodazio Erico Mai ad CMCC Follow his ad addiioal works a: hp://srvics.bprss.com/fm commdd Ciaio Carraro Carlo; Cia Erica; ad Tavoi Massimo "Huma Capial Iovaio ad Clima Policy: A Igrad Assssm" April Fodazio Ei Erico Mai Workig Paprs. Papr 669. This workig papr si is hosd by bprss. Copyrigh 2012 by h auhors.

2 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad Huma Capial Iovaio ad Clima Policy: A Igrad Assssm Carlo Carraro Uivrsiy of Vic Fodazio Erico Mai CEP CESifo ad CMCC Erica Cia Fodazio Erico Mai ad CMCC Massimo Tavoi Fodazio Erico Mai ad CMCC Absrac This papr looks a h irplay bw huma capial ad iovaio i h prsc of clima ad ducaioal policis. Usig rc mpirical simas huma capial ad gral purpos ar iroducd i a igrad assssm modl ha has b xsivly applid o sudy clima chag miigaio. Our rsuls suggs ha clima policy simulas gral purpos as wll as cla rgy bu rducs h iciv o ivs i huma capial formaio. Huma capial icrass h produciviy of labour ad h complmariy bw labour ad rgy drivs is polluio-usig ffc dirc ffc. Wh huma capial is a ssial ipu i h producio of gric ad rgy ddicad kowldg h crowdig ou iducd by clima policy is miigad hough o complly offs idirc ffc. Th polluio-usig implicaios of h dirc ffc prvail ovr h idirc coribuio of huma capial o h craio of w ad clar kowldg. A policy mix ha combis ducaioal as wll as clima obcivs offss h huma capial crowdig-ou wih a modra shor-rm cosumpio loss. Huma capial is complm o all forms of iovaio ad a ducaioal policy simulas boh rgy ad gral purpos iovaio. This rsul has impora policy implicaios cosidrig h growig cocr ha ffciv clima policy is codiioal o solid coomic dvlopm ad hrfor i ds o b supplmd by ohr policy args. Kywords Clima Policy Iovaio Huma capial JEL Cods O33 O41 Q43 Publishd by Brkly Elcroic Prss Srvics

3 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] 1. Iroducio A icrasig umbr of igrad assssm modls usd i clima chag policy aalysis hav lookd a h dyamics of chical chag. Modls dscribig chical chag as a dogous procss mak i possibl o sudy h rlaioship bw clima policy ad chical chag ad o valua h implicaios of policy-iducd chical chag ITC o h macrocoomic coss of clima policy. A firs wav of sudis focusd o iovaio i h rgy scor h raso big h rlvac of rgy fficicy masurs ad dcarboisaio of rgy as miigaio sragis Nordhaus 2002 Popp 2004 Bosi al Ths modls assum ha chical chag is cssarily rgy-savig glcig ohr forms of iovaio or chical chag ha could acually hav a rgy-usig ffc s for xampl Maagi ad Kumar 2009 Carraro ad Cia This approach cours h risk of udrsimaig h coss of clima policy bcaus i ovrlooks h macrocoomic dyamics of chical chag ad cao rack how clima policy rdisribus rsourcs across diffr scors. A icrasig umbr of clima-coomy modls ow faurs boh rgy savig ad rgy-usig dogous chical chag Gouldr ad Schidr 1999 Su Wig 2008 Oo al Grlagh 2008 Carraro al Massi ad Nicia Ths modls shar h ida ha chology advacms i boh rgy- ad o-rgy scors ar driv by a spcific sock of kowldg. Thy all agr ha clima policy modifis o oly h dircio of chical chag bu also h oal lvl of iovaiv aciviy. Gouldr ad Schidr 1999 Su Wig 2008 ad Oo al mphasis how h gral quilibrium ffc du o h policyiducd icom rducio ca lowr h ovrall amou of rsourcs availabl for kowldg craio. Grlagh 2008 shows ha if a suffici amou of ivsms go o rgy-savig chical chag h hr migh b a rsarch dividd ad ovrall rsarch aciviy may icras. Carraro Massi ad Nicia 2009 Massi ad Nicia 2010 highligh ha h complmariy bw rgy ad o-rgy ipus drivs h dircio of iducd chical chag i li wih hory of dircd chical chag Acmoglu Guidd by h mpirical vidc o iducd iovaio Laouw ad Mody 1996 Jaff ad Palmr 1997 Nwll Jaff ad Savis 1999 ad Popp 2002 ad followig maisram growh hory.g. Arrow 1962 omr 1986 ad 1990 Grossma ad Hlpma 1991 Aghio ad Howi 1992 Acmoglu 2002 Acmoglu al mos clima-coomy modls assum ha h gi of chical chag is h accumulaio of kowldg or xpric. Ohr drivrs such as huma capial Lucas 1998 Blakau ad Simpso 2004 or rad Camro 2005 Maagi ad Kumar 2009 Carrao ad Cia 2009 hav b glcd. Th arrow focus o rgy 2 2

4 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad has boudd h applicabiliy of IAM o h sudy of cla iovaio i rlaio o clima chag. By omiig ohr gis of macrocoomic growh h cocios wih coomic dvlopm hav o b fully aalysd by h modllig liraur. Th aim of his papr is o xplor his likag ad provid som ovl isighs o h cocios bw clima chag ad coomic dvlopm wih a paricular focus o ducaio. Clima chag policy ad ducaio ca irac hrough svral chals. Firs of all a highr lvl of huma capial ca mak miigaio policis mor ffciv. Huma capial is a ssial ipu i h craio of w kowldg ad w producs ad hrfor i is bhid rgy-savig iovaio as wll. Br skills ca b xpcd o lad o a fasr dvlopm of chologis ha ca rplac or rduc h us of fossil fuls. Som sudis do suppor h xisc of a posiiv rlaioship bw iovaio ad huma capial bu a h aggrga lvl Griffih ddig ad Va 2000 Tixira ad Forua To our kowldg hr ar o mpirical works ha hav lookd a h rlaioship bw kowldg ad huma capial i h cox of clima-rlad iovaio. By simulaig labour produciviy ad coomic growh xpdiur i ducaio ca icras h amou of rsourcs availabl for produciv usags icludig iovaio. Huma capial is posiivly rlad o h capabiliy of adopig clar chologis Nlso ad Phlps 1966 dvlopd udr h simulus of viromal policy. Educaio ca also b xpcd o improv h ffcivss of adapaio masurs. Th Third Assssm por of h IPCC idifid huma capial amog h drmias of adapiv capaciy. Accordig o Yoh 2001 huma capial o oly affcs h abiliy o rspod o clima variabiliy ad chag bu i is also a drmia of miigaiv capaciy. Fially ducaio is fudamal o icras h awarss of clima chag which i ur should icras h willigss of vors o suppor clima policy. Th achivm of uivrsal primary ducaio is o of h igh Millium vlopm Goals o b achivd by 2015 oghr wih susaiabl dvlopm. Th qusio w ask i his papr is whhr hr ar syrgis bw ducaioal ad clima chag policis ha go hrough h iovaio ad growh chals. Our sarig framwork is a igrad assssm modl wih a good characrisaio of dogous chical chag bu cofid o h rgy scor Bosi al W amd h macrocoomic producio srucur o accou for facor-augmig ffc of gral purpos ad huma capial. This iroducs a dirc lik bw huma capial ad coomic growh. I his sig h disribuiv ffcs of policy i diffr forms of xpdiur ad iovaio ca b fully characrisd. W also look a h idirc ffc ha huma capial could hav o chology absorpio ad iovaio hough as a xploraiv aalysis aimd a idifyig aras for fuur rsarch. Th papr proposs a comparaiv aalysis of clima policy Publishd by Brkly Elcroic Prss Srvics

5 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] udr hr modl varias ha abl us o valua how h iducd-chical chag hypohsis rspods o diffr rprsaios of chical chag. Th mor gral ram of dogous chical chag allow us broad h focus of h aalysis from h arrow clima policy-rgy-iovaio lik o h clima chag ad coomic dvlopm xus. Our rsuls idica ha clima policy simulas ddicad ivsms i rgy wihou rducig gral purpos iovaio. O h ohr had ducaio xpdiurs ar rducd palisig h formaio of huma capial. Wha drivs his rsul is h assumpio ha huma capial is polluio-usig bcaus i augms h produciviy of labour which is gross complm o rgy. Th crowdig-ou of clima policy o ducaio xpdiur is lssd if rsourcs allocad o ducaio ca fosr chology absorpio ad iovaio. W also fid ha huma capial is complm o all forms of iovaio. A policy ha susais ducaio xpdiur simulas boh rgy ad gric iovaio. This implis ha a policy mix ha combis a clima sabilisaio arg wih a ducaioal policy susaiig ducaio xpdiur could rduc h log-ru macrocoomic coss of h clima policy. Th addiioal coss of implmig h wo policis ar rasiory ad i h log-ru a scal ffc parly miigas clima chag policy coss. Th rs of h papr is orgaisd as follows. Scio 2 dscribs h rlaioship bw chical chag ad ipu subsiuio wh chical chag is facor-spcific. Facor-augmig chical chag driv by iovaio ad huma capial is h icorporad io a Igrad Assssm Modl. Policy scarios ar aalysd i Scio 3 ad 4. Scio 5 cocluds. 2. Facor-augmig chical chag ad IAMs 2.1 Facor-augmig chical chag ad ipu subsiuio Narly all IAMs dscrib producio usig Cosa Elasiciy of Subsiuio CES producio fucios. Cosidr h simpls xampl of CES producio fucio bw labour L capial K ad rgy EN 1 : Y σ 1 σ 1 σ 1 σ σ σ σ σ 1 = H A K + AL L + AEN EN K 1 whr σ is h lasiciy of subsiuio bw h hr ipus ad Y is h fial good producd i h coomy which ca b usd for cosumpio or ivsm. Facors of producio ar xprssd i fficicy uis. Th muliplicaiv cofficis A i rprs h produciviy of ipus. Nural chical chag is dscribd by h paramr H. 1 Th choic of a o-sd CES as opposd o a s CES bw a capial labour budl ad rgy is o rlva for h rsuls discussd i h papr. Wha ulimaly drivs h rsuls is ha o-rgy ipus capial ad labour ar gross complms o rgy. 4 4

6 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad Allowig for dogous diffrcs i h dvlopm of chology paramrs has a horical foudaio i h work o dircd chical chag Acmoglu Wh facoraugmig chical chag is dogous h ffc of chology drivrs ca b boh rgyusig or rgy-savig. Cosidr a dogous formulaio as simad i Carraro ad Cia 2009 whr capial ad rgy produciviy dpd o h sock of gric kowldg whil labour produciviy dpds o huma capial HK: A A A K EN L = A = A = A K 0 L 0 EN 0 HK L K χ χ χ EN 5 Wih gross complmariy bw facors of producio σ < 1 ad posiiv lasiciy of huma capial o labour produciviy χ L huma capial has a rgy-usig ffc: EN L HK σ σ χ L χ L 1 P L ALo HK ALo HK = 1- σ χ L > 0 if σ < 1ad χ L PEN AEN AEN > 0 6 As for h dirc impac o rgy dmad is gaiv.g. rgy-savig if h lasiciy of subsiuio is lss ha o. Howvr h idirc impac via capial produciviy is rgy-usig as i h cas of huma capial. Th ffc ulimaly dpds o h rlaiv siz of h lasiciy of capial ad rgy produciviy wih rspc o kowldg χ K ad χ EN. Carraro ad Cia 2009 fid ha ha χ K < χ EN suggsig ha ovrall gral purpos has a rgy-savig ffc. Th x scio dscribs how his formulaio of chical chag has b igrad i h igrad assssm modl WITCH. 2.2 Facor-augmig chical chag ad h WITCH modl Modl hacm Th WITCH modl Bosi al alrady provids a horough characrisaio of iovaio bu oly i h rgy scor. WITCH is a rgioal igrad assssm hard-lik hybrid modl. Is op-dow compo cosiss of a irmporal opimal 2 A horough dscripio ad a lis of rlad paprs ad applicaios ar availabl a hp:// Publishd by Brkly Elcroic Prss Srvics

7 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] growh modl i which h rgy ipu of h aggrga producio fucio has b xpadd o giv a boom-up lik dscripio of h rgy scor. Th modl accous for chological advacs ha ca occur i h rgy scor disiguishig bw h ivio/iovaio phas ad h procss of diffusio ad dploym. Th modl disiguishs ddicad ivsms for hacig rgy fficicy from ivsms aimd a faciliaig h compiivss of iovaiv low carbo chologis brakhrough chologis. Sarig from his s-up w iroduc dogous chical chag wih ipu-spcific chology drivrs. W compar hr modl varias ha diffr i h way of accouig h rol of huma capial. Th sarig s-up modl 1 oly cosidrs h dirc ffc of huma capial o labour produciviy followig h spcificaio simad i Carraro ad Cia Th firs varia modl 2 adds o h dirc ffc a idirc coribuio via chology diffusio. I his cas huma capial icrass h absorpiv capaciy. Th scod varia modl 3 xplors h rlaioship bw huma capial ad iovaio addig h coribuio of h idirc ffc of huma capial o kowldg formaio. All modl quaios ca b foud i h Appdix. I h rmaiig of his scio w dscrib modl hacm calibraio ad sig. Th macrocoomic producio srucur is modifid o accommoda for facor-augmig chical chag wih ddicad chology drivrs q. A4. I h modifid modl capial ad rgy produciviis dpd o a gric kowldg sock h sock of gral purpos xpdiur whras labour produciviy o huma capial h sock of ducaio xpdiur s q. A5. I addiio o h ffc of gral purpos ddicad rgy fficicy ca spcifically addrss improvms i rgy fficicy q. A5 or dvlop brakhrough chologis q. A11. Sic h dyamics of chical chag i all scors ar ow dogous rgy ivsms comp wih h rsourcs ha ar allocad o huma capial dvlopm ad gric. Th producio of boh huma capial ad kowldg is characrisd by irmporal spillovrs. Th sock availabl i ach rgio a a giv poi i im coribus o h craio of h fuur sock. Followig sa-of-h-ar liraur omr 1990 Jos 1995 Popp 2002 Glomm ad avikumar 1997 Blakau ad Simpso 2004 w assum ha huma capial is producd usig a Cobb-ouglas combiaio of h xisig sock of huma capial ad curr xpdiur i ducaio. q. A6 ad A7. I a similar way h availabl kowldg sock ad curr ivsms ar combid o produc w kowldg qs. A8 ad A9. Th craio of rgy kowldg is also iflucd by iraioal spillovrs s q. A10. Forig kowldg ca 6 6

8 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad impac domsic procss of kowldg craio dpdig o coury s absorpiv capaciy ad disac from h froir Bosi. al I h wo xdd vrsios of h modl hs quaios ar modifid o accou for h idirc coribuio of huma capial. Firs of all modl 2 huma capial icrass h abiliy o adop w chologis. This idas gos back o h modl of chology diffusio iroducd by Nlso ad Phlps Couris ca bfi from h world chology froir by icorporaig mor advacd chologis io hir coomy. Tchology adopio is a huma capial-isiv aciviy ha rquirs skill labour. Thrfor a largr sock of huma capial facilias h absorpio of w producs ad w discovris. Th ida ha succssful chology diffusio rquirs suffici absorpiv capaciy Coh ad Lvihal 1990 has b mpirically suppord by a umbr of sudis Bhabib ad Spigl 1994 Griffih ddig ad Va Mor rcly Luz al cofirmd ha huma capial acclras h covrgc owards h chological froir rprsd by h richs coury. W igra his ida io our modl modl vrsio 2 s abl 4 by assumig ha h absorpiv capaciy improvs o oly by h rgy kowldg sock bu also by buildig up huma capial s quaio A13 i h Appdix. I h scod modl varia modl vrsio 3 s abl 4 huma capial is a ssial ipu i h craio of boh socks of gric ad rgy kowldg s q. A14. Modl calibraio Educaio ad ivsms hav b calibrad usig h hisorical rgioal shars of xpdiur ovr Gross omsic Produc for ach rgio of h modl. World xpdiur o gric i 2005 is 2.17% of GWP global ducaio xpdiur 4.34%. As show i Tabl 1 OEC couris hav h largs shar i boh ducaio ad xpdiur. Tabl 1. ivsms ad ducaio xpdiur. Hisorical daa a h calibraio poi of 2005 % GP Hisorical daa Ergy IEA Gric WI Educaio WI WOL 0.03% 2.17% 4.34% OEC 0.03% 2.49% 4.55% NON-OEC.a. 0.93% 3.62% IEA: Iraioal Ergy Agcy WI: World vlopm Idicaors 3 Alhough i would b aural o characris spillovrs i h gral purpos scor w rfrai from doig so mosly bcaus of cosiscy wih h mpirical sudy ha is usd o calibra our modl which did o accou for spillovrs. I addiio prvious sudis s Bosi al 2008 show ha h coribuio of kowldg spillovrs is limid. Publishd by Brkly Elcroic Prss Srvics

9 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] Th hr facors of producio labour rgy ad capial ar modlld as gross complms bcaus mos coomric sudis suggs ha his i fac rflc h hisorical pars obsrvd i h daa. Carraro ad Cia 2009 usig yarly daa simad h lasiciy of subsiuio bw capial labour ad rgy qual o 0.3. Howvr i h modl a highr valu qual of 0.7 is chos for wo rasos. Firs h modl im sp is of fiv yars whras h simad valu is basd o yarly pal. Th lasiciy of subsiuio ovr fiv yars is highr ha h lasiciy ovr o yar as discussd i Pssoa al Scod h valu 0.3 is basd o h vidc from dvlopd coomis. I coras dvlopig couris ar characrisd by highr coomic growh ad largr subsiuio possibiliis. Bcaus w do o hav h daa o diffria dvlopd ad dvlopig couris w hav chos a commo valu ha mad i possibl o rplica rgioal coomic growh pars as i Bosi al I is impora o mio ha h simad lasiciis vary qui sigificaly from vry low o high valus v grar ha o s for xampl va dr Wrf Th ky drivr for h dircio of chical chag is whhr h lasiciy is grar or smallr ha o bu h acual valu dos o affc h dircio of h rsuls. Tabl 2 summariss h valus of ky paramrs. Tabl 2. Subsiuio lasiciy bw labour capial ad rgy σ ad facor lasiciy wih rspc o dogous chology drivrs σ 0.7 χ L HK 0.17 χ E 0.60 N χ K 0.26 A subsiuio lasiciy lss ha o implis ha ipus ca b subsiud wih ach ohr bu wih som rigidiy. Wh a ipu bcoms mor produciv ad hr is full mploym of rsourcs addiioal produciviy lads o addiioal oupu. This scal ffc pus a upward prssur o h dmad for ohr ipus as wll ad hus o rgy. As a cosquc assumig hr ar o chags i h rgy mix rgy-rlad missios would icras. This argum glcs h disicio bw skilld ad uskilld labour which would mak h discussio mor complicad. A rlaioship of complmariy bw labour ad ohr ipus capial is ypically foud wh skilld labour is cosidrd. Isad mpirical sudis foud ha capial d o b a subsiu for uskilld labour. As a cosquc h sock of huma capial drivs a form of chical progrss ha is rgy-usig. I coras h ffc of gric iovaio is rgysavig if i improvs rgy produciviy mor ha capial. 8 8

10 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad gardig h calibraio of idirc ffcs w mad h followig assumpios. I h firs varia modl 2 huma capial is simply addd o h rgy kowldg sock i h absorpiv capaciy compo of quaio A13. Th calibraio of h idirc coribuio of huma capial o kowldg formaio modl 3 is lss sraighforward du o h lack of clar mpirical guidac. A fw sudis sd h hypohsis ha iovaio is iflucd by h dowm of huma capial by simaig a Cobb-ouglas producio fucio i which oal facor produciviy is drmid by huma capial ad hir iracio. Boh Griffih ddig ad Va 2000 usig a pal of OEC couris ad Tixira ad Forua 2004 usig ims sris for Porugal foud a posiiv ad sigifica coffici associad wih h iracig rm idicaig a posiiv rlaioship bw iovaio ad huma capial. For h coribuio of huma capial o kowldg craio γ EU w choos a rag of valus bw 0.1 ad Th maximum valu xprimd corrspods o h cofficis simad by Griffih ddig ad Va 2000 ad Tixira ad Forua 2004 which ar clos o 0.4. I should b poid ou ha hs mpirical sudis cosidr h oi ffc of huma capial ad iovaio o oal facor produciviy growh. This approach is diffr from simaig a dirc rlaioship bw huma capial ad iovaio usig a iovaio producio froir which isad is h modllig approach adopd i his papr. Modl sig Bfor cosidrig h implicaios of clima policy w prform a ad-hoc xprim o s h macrocoomic ffcs of icrasig ducaio xpdiur. W impos a 10% xogous icras i ducaio xpdiur ad w compu h lasiciy of slcd variabls. For his sig xrcis w us h firs modl vrsio wih o idirc ffcs. As rpord i Tabl 3 h ΔY lasiciy of fial oupu o ducaio Δ I EU is largr ha zro idicaig a posiiv rlaioship bw ducaio xpdiur ad oupu growh. This rsul occurs wh ducaio is fiacd wih cosumpio axs Blakau ad Simpso I h WITCH modl ducaio xpdiur is fiacd ou of h budg cosrai ad hr ar o disorig axs o labour or capial. Addiioal ducaio xpdiur coms a h coss of lowr cosumpio bu oly i h shor-rm. Afr 2035 h growh ffc icrass cosumpio possibiliis as wll as idicad by h posiiv valu of h lasiciy. 4 I is rasoabl o xpc h ducaio ffc o kowldg o b lowr ha h ffc of boh ivsms ad capial sock. Th siz of his paramr is also cosraid by h valu of h ohr paramrs ad h rsricio ha h sum cao xcd 1. Paramrs i h iovaio producio froir hav b rcalibrad so as o yild h sam basli as i h basic modl. 9 Publishd by Brkly Elcroic Prss Srvics

11 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] Th xpasio of coomic aciviy has wo addiioal ffcs. Emissios icras bcaus coomic growh pus a upward prssur o rgy dmad. A h sam im coomic growh icrass h amou of rsourcs availabl for all forms of iovaio poiig a h complmariy bw kowldg ad huma capial. Boh gric ad ddicad rgy icras alhough h ffc o gric iovaio is slighly largr. Bcaus par of iovaio is rgy-savig i h mdium/log-rm his lads o a pak ad dcli afr 2050 of h lasiciy of missio o ducaio whras h lasiciis of oupu ad cosumpio coiu o icras ovr im. Tabl 3. Elasiciis o ducaio xpdiur wh his is icrasd by 10% ΔY Δ I EU ΔC Δ I EU ΔEMI Δ I EU Δ I ΔI EU Δ I ΔI EU Δ I EU % % % % This simpl xrcis illusras how ivsig i huma capial formaio affcs o oly coomic growh ad cosumpio bu also iovaio ad missios. I ligh of hs rsuls wha is h xpcd oucom of clima policy? O h o had huma capial is polluio-usig ad hrfor i may mak h achivm of a sabilisaio arg mor difficul. O h ohr had h posiiv ffc ducaio has coomic growh ad iovaio may parially compsa h coomic loss du o clima policy. Ths issus ar xplord i h x Scio. 3. Implicaio of sad-alo clima policis W ow ur o h implicaios of a clima policy o h accumulaio of kowldg huma capial ad ulimaly h dircio of chical chag. Tabl 4 summariss h diffrcs across h hr spcificaios of dogous chical chag cosidrd

12 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad Tabl 4. Th rol of huma capial i h hr modl vrsios cosidrd Huma capial hacs labour produciviy Huma capial hacs absorpiv capaciy Huma capial rs as ipu i h iovaio producio fucio dirc ffc Modl 1 Ys No No Modl 2 Ys Ys No Modl 3 Ys No Ys 3.1 Clima policy wh huma capial has a dirc ffc o labour produciviy modl 1 W cosidr a clima policy i which all rgios coopra o h sabilisaio of GHG cocraios a 550 CO2-q by which dfis h global cap o missios. A iraioal cap-ad-rad sysm allows rgios o buy ad sll prmis o h world mark so as o achiv h arg i h mos cos-ffciv way qualisig margial coss of abam across rgios 6. Th sig is ha of cos-ffcivss ad hrfor h macrocoomic coss of h policy do o cosidr h bfis du o rducd clima chag damags. Wh facig a clima policy cosrai ach rgio rshaps h opimal mix of ivsms o m h cosrai a h miimum cos. Th carbo pric sigal rallocas rsourcs owards low carbo chologis rwabl rgy coal quippd wih carbo capur ad sorag ad uclar rgy fficicy cla rgy ad subsquly o h dploym of h chologis brakhrough ar cla chologis ha rplac fossil fuls. I h modl h cos of brakhroughs is dogously driv by i h firs plac ad oc h chology is dployd by isalld capaciy followig a wo-facor larig curv s q. A11. Figur 1 shows ha clima policy simulas ddicad ivsms i rgy as wll as gral purpos iovaio. This is du o h fac ha gral purpos by raisig h produciviy of 5 I should b srssd ha h chos clima policy scario is oly illusraiv. Th goal of his papr is o udrsad h basic mchaisms bhid iducd iovaio wh hr is also huma capial. W hrfor absrac from scodbs cosidraios ad from h aalysis of mor ralisic policy scarios. 6 Prmis ar allocad o a qual pr capia basis. This allocaio schms d o favour dvlopig couris. Howvr h goal is o o provid a comprhsiv valuaio of diffr policy archicurs bu rahr o mphasis h rad-off ad/or h syrgis bw diffr policy goals a h global lvl. Publishd by Brkly Elcroic Prss Srvics

13 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] rgy mor ha ha of capial improvs rgy fficicy ad his is a cos-ffciv abam opio. Figur 1 also shows h allocaio of rgy bw rgy fficicy masurs ad brakhrough. Ergy iovaio is mosly dircd a rducig h coss of brakhrough chologis bcaus his will rduc h log-ru coss of dcarboisig h rgy sysm. I absolu lvls ad ovr h whol cury clima policy allocas a comparabl amou of rsourcs o rgy ad gral purpos. Thr is hough a diffrc i h im profil. Ergy icrass mosly i h shor-ru as a rspos o h aicipaio of a risig carbo pric. Gral purpos isad ovraks rgy afr Boh forms of iovaio rduc h rgy pr ui of oupu ad hrfor ar complms rahr ha subsius. This rsul diffrs from prvious fidigs ha cosidrd diffr programs bu glcd h rol of huma capial Gouldr ad Schidr 1999 Su Wig 2008 Carraro Massi ad Nicia 2009 Massi ad Nicia For xampl Carraro Massi ad Nicia 2009 ad Massi ad Nicia 2010 assum ha o-rgy is rgy-usig. Thrfor clima policy icras rgy bu rducs o-rgy. Our rsul is i li wih rc mpirical vidc which cofirmd ha crowdig-ou bw cla ad diry rgy migh xis bu o bw iovaio i h rgy ad o-rgy scor Popp ad Nwll Figur 1. Addiioal ivsms i various yps of kowldg i h clima policy wih rspc o h Busiss as Usual BaU gardig h rsuls o huma capial Figur 1 shows ha clima policy iducs a crowdig-ou o ducaio xpdiur. I absolu umbrs h rsourcs ha ar divrd away from h ducaio scor ar sigifica rachig abou 1 rillio US afr As alrady aicipad his is du o h fac ha huma capial is labour-augmig ad o h complmariy bw rgy ad labour. This is a rsul ha has b alrady foud i h 12 12

14 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad liraur o viromal policy ad huma capial. Wh polluio is likd o fial oupu viromal policy ca rduc ducaio xpdiur ad slow dow huma capial accumulaio Gradus ad Smuldrs 1993 Hich 1998 Paurl Clima policy wh huma capial has a idirc ffc o absorpiv capaciy modl 2 W ow ur o h ffc of clima policy wh huma capial has a idirc ffc o h capaciy o absorb forig kowldg. Our modl faurs iraioal spillovrs of rgy kowldg. Forig rgy kowldg ca coribu o h craio of a domsic sock of rgy kowldg providd h absorpiv capaciy is sufficily larg ad dpdig o h disac from h chology froir dfid as h sock of rgy kowldg i high-icom couris 7 Bosi. al Ivsig i rgy is a impora miigaio bcaus i icrass rgy fficicy masurs ad favours h larg scal dploym of zro-carbo chologis. Th kowldg sock ca b hacd by ihr ivsig domsically i rgy or by usig h idas ad oios alrady dvlopd i ohr couris. Howvr his lar opio is ffciv oly if couris hav h miimum capaciy rquird o xploi ohr rgios idas. W upgrad his faur by assumig ha huma capial ca coribu o improv o coury absorpiv capaciy which i h origial modl dpds oly o h rgy kowldg sock s quaio A13 i h Appdix. Huma capial big a ipu i h craio of w rgy kowldg has a idirc rgy-savig ffc hough of a small magiud compard o h mor dirc ffc o labour produciviy. Our rsuls idica ha addig huma capial as a drmia of absorpiv capaciy dos o sigificaly affc h dyamics of iovaio ad ducaio xpdiur s Tabl 5. Udr his modl spcificaio clima policy iducs a slighly rducd crowdig-ou a mos 12% smallr ha i h basic modl 1. Ergy ivsms ar lowr spcially durig h firs dcads bcaus huma capial icrass h capaciy o bfi from h pool of iraioal rgy kowldg hus rducig h rquirm i rms of domsic ivsms. Mdium- ad log-rm ivsms i gric slighly icras driv by h posiiv scal ffc o coomic growh. Th macrocoomic coss of h clima policy ar rducd from 1.37% o 1.32% of prs valu cosumpio. 7 High icom couris i h WITCH modl ar Uid Sas Wsr Europ Easr Europ Souh Kora Ausralia Caada Japa Nw Zalad. Publishd by Brkly Elcroic Prss Srvics

15 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] Tabl 5: Huma capial ad kowldg ivsms i h clima policy. Chag bw modl 2 ad modl 1 i rlaiv ad absolu rms 2005US Billio i parhsis Ergy Gral purpos Educaio xpdiur % % % % % % % % This xrcis idicas ha accordig o our modl spcificaio- h idirc ffc of huma capial o h capaciy o absorb forig kowldg i h cla rgy scor ca oly parly rduc h coracio of ducaio xpdiurs. Th limid rol of rgy spillovrs is i li wih wha origially foud by Bosi. al cofirmd a robusss aalysis of h paramr spac by mas of ssiiviy aalysis. 3.3 Clima policy wh huma capial has a idirc ffc o kowldg craio modl 3 Th rsuls rgardig h crowdig ou of clima policy o huma capial also follow from h assumpio ha huma capial dos o affc h procss of craio of w idas ad chological iovaios. To icorpora his mchaism io our framwork w iroduc modl 3 whr h iovaio froir of boh rgy ad gric is likd o h sock of huma capial s quaio A14 i h Appdix. Through his addiioal chal huma capial has a idirc impac o rgy ad capial produciviy. u o h lack of clar mpirical guidac w prform ssiiviy aalyss ovr a wid rag of lasiciis bw huma capial ad kowldg bw 0.1 ad Figur 2 shows h rsuls from his formulaio. Bcaus of h addiioal lik bw huma capial ad kowldg ducaio bcoms a ssial ipu i h producio of kowldg which has a rgy-savig ffc as discussd i Scio 2.1. For his spcificaio v wih a small lasiciy h crowdig-ou of ducaio xpdiurs is sigificaly miigad. This ffc is mor prooucd ha h absorpiv capaciy o dscribd 8 I is rasoabl o xpc h ducaio ffc o kowldg o b lowr ha h ffc of boh ivsms ad capial sock. Th siz of his paramr is also cosraid by h valu of h ohr paramrs ad h rsricio ha h sum cao xcd 1. Paramrs i h iovaio producio froir hav b rcalibrad so as o yild h sam basli as i h basic modl

16 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad i h prvious paragraph ssially bcaus of h modl formulaio. Huma capial rcivs a shar of 0.1 i h kowldg craio procss. Alhough iraioal kowldg gs a slighly largr shar qual o 0.15 h sock of forig rgy kowldg is much smallr ad i addiio oly par of ha is usd by h rcipi coury. Furhr icrasig h coribuio of huma capial.g. icrasig h lasiciy coius o rduc h crowdig-ou alhough by a smallr margi. Howvr h sig of h rlaio bw clima policy ad ducaio is vr rvrd for h various paramrisaio cosidrd ad ducaio is always crowdd ou. gardig iovaio ivsms i gric ar iiially rducd compard o h basic modl i which kowldg grows oly wih xisig kowldg sock bu afr hy bcom largr. Howvr h magiud of variaio is small a mos 1.16% i I coras rgy ivsms ar rducd mor sigificaly spcially durig h firs dcads. Lss ddicad iovaio is dd o m h sabilisaio arg bcaus h sock of huma capial adds a oabl coribuio o dvlop h rgy kowldg sock ha drivs rgy fficicy improvms ad rducs h cos of advacd carbo-fr chologis. Th macrocoomic coss of h clima policy ar rducd from 1.37% o 0.92% of prs valu cosumpio wh h shar o huma capial i kowldg producio is 0.1. Cosumpio losss fall furhr o 0.66% wh his shar is icrasd o 0.4. Figur 2. Educaio xpdiur i h clima policy chags wih rspc o BAU udr modl 1 ad hr paramrisaio of modl 3 γ EU = Publishd by Brkly Elcroic Prss Srvics

17 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] 3.4 Sum up of h implicaios of clima policy udr diffr modl spcificaios Th aalysis carrid ou wih h hr modl varias dscribd i h prvious Scios pois o similar coclusios. Clima policy icrass iovaio boh i rms of gric ad rgy bu crowds ou par of h ivsms i ducaio. Alhough modllig h idirc ffcs of huma capial o absorpio capaciy ad kowldg formaio is abl o lss h crowdig-ou iducd by clima policy h dirc rgy-usig ffc is show o prvail. A summary of hs rsuls is providd i Tabl 6. I should b srssd ha modllig rsuls ulimaly dpd o h simad lasiciis rpord i Tabl 2 which ar h cral valu simas. Th cofidc irvals of hos simas ar vry broad. This implis ha hr ar combiaios of h hr lasiciis for which h idirc ffcs of huma capial ca offs h crowdig-ou iducd by clima policy. This ca occur for xampl wh h lasiciy of labour produciviy o huma capial is s qual o h lowr boud of h cofidc irval 0.02 whil h ohr wo paramrs ar lf qual o h cral valu simas. I his cas h idirc ffc o absorpiv capaciy ad kowldg formaio assumig a coribuio qual o 0.1 prvails. Tabl 6: Impac of clima policy o iovaio ad huma capial dyamics: summary across modl spcificaios. Prcag chag of cumulaiv ivsms compard o BaU 2005US Trillio i parhsis Basic modl modl 1 Basic modl+ idirc ffc o absorpiv capaciy modl 2 Basic modl+ idirc ffc o kowldg craio modl 3 268% % % 9.2 Ergy 4.9% % % 12.8 Gral purpos -8.4% % % Educaio xpdiur Policy Coss iscoud Cosumpio loss -1.37% -1.32% -0.92% Th gral rsuls poi o a poial coflic bw policis o aai clima sabilisaio ad huma capial improvms. This implis ha h huma capial crowdig-ou ds o b addrssd by spcific policis. I h x Scio w valua a combiaio of clima ad ducaio policy

18 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad 4. Couplig clima ad ducaio policis Clima policy args ar likly o b addiioal o ohr policy commims. A xampl is giv by h EU aciv rol i clima policy as wll as is commim o susaiig ducaio ad iovaio. Aohr xampl is providd by h Millium vlopm Goals MGs which ar igh diffr obcivs ha hav b accpd by 189 couris ad ha should b achivd by Uivrsal primary ducaio ad susaiabl dvlopm which icluds clima chag miigaio ar wo of h igh Goals. Th Fourh Assssm por IPCC 2007 also mphasisd ha o b ffciv clima policy should b supplmd by gric socio-coomic dvlopm ad icrasd miigaiv capaciy. This suggss ha hacig ducaio a drmia of miigaiv capaciy Yoh 2001 is a policy obciv islf. Primary ducaio is almos uivrsal i all dvlopd couris ad may dvlopig couris ar o h righ rack o achiv h Millium vlopm Goals o-rack couris. Achivig uivrsal primary ducaio is paricularly challgig i poor couris such as Souh Asia SASIA ad Sub-Sahara Africa SSA. Agais his backgroud w aalys a combiaio of clima ad ducaio policy. W dsig h followig ducaio policy. Th Sub-Sahara Africa ad Souh Asia SSA ad SASIA rgios will icras ducaio ivsms so ha h fracio of populaio currly off-rack will b o-rack from 2015 owards 9. Th rmaiig rgios will maiai h pah of ducaio xpdiur fors i h o-clima policy cas as curr spdig is alrady cosis wih h achivm of h MG. I ordr o compu h addiioal spdig o ducaio i SSA ad SASIA w combid h prcag of populaio off-rack 10 from Glww al wih populaio procios form h WITCH modl. W also usd h simas of avrag spdig pr sud providd by Glww al which amous o US$ 46 Billio i SASIA ad US$ 68 Billio i SSA. Bw 2010 ad 2015 Sub-Sahara Africa ad Souh Asia icras ducaio xpdiur by US$ 100 Billio a yar which is comparabl o curr spdig o Official vlopm Assisac 11. Th macrocoomic ffcs of combiig ducaio ad clima policy ar show i Tabl 7. 9 Couris or populaio ar classifid o-rack i achivig uivrsal primary ducaio if coiuig o liar rds bw 1990 ad 2002 will rsul i a complio ra abov 95% by Off- rack mas ha h complio ra is procd o b blow 50% i 2015 sriously off rack or blow 95% modraly off rack. 10 Th implici assumpio is ha avrag spdig ad h prcag of populaio off-rack rmais cosa bw 2000 ad Afr 2015 SSA ad SASIA coiu o spd a las h avrag amou rquird o hav all populaio o-rack. Publishd by Brkly Elcroic Prss Srvics

19 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] Tabl 7 Global macrocoomic ffcs of oi clima ad ducaio policis. Basic modl wih oly dirc ffc modl 1. Prc chags compard o BaU 5% discouig for NPV. Educaio xpdiur Gric Ergy Oupu Cosumpio % 4.82% % -1.03% -1.13% % 6.39% % -2.09% -1.88% % 5.68% % -1.37% -1.41% NPV 1.13% 4.60% % -1.03% -1.12% NPV Clima policy oly -5.31% 4.15% % -1.37% -1.09% Addig h ducaio policy simulas furhr iovaio spcially gric which has a dirc impac o facor produciviis ad hus o coomic growh. Th icras i ducaio xpdiur also pus a upward prssur o missios as wll. This rsul is i par du o h lasiciis of oupu ad missios o ducaio ivsms show i Tabl 3. Th lasiciy of oupu is largr ha ha of missios ad hrfor h addiioal ffor rquird o comply wih h arg is limid. This is cofirmd by h almos gligibl impac o h margial abam coss. Th carbo pric icrass bu oly slighly a mos by 2% a h d of h cury ad h ffc o oupu growh parially compsas h coss of clima policy. I N Prs Valu clima miigaio coss ar lowr i rms of gross world oupu bu highr i rms of cosumpio. This rsul raiss h issu of h appropria mric o masur h coss of a policy Hourcad ad Ghrsi Whras oupu provids a masur of h macrocoomic ffcs cosumpio is a br idicaor of wlfar. I addiio prs valus ar aggrga figurs ha hid a rad-off bw shorrm ad log-rm cosumpio which is furhr aalysd i Figur 3. I h shor-rm ducaio policy absorbs addiioal rsourcs rducig cosumpio possibiliis. Howvr shorrm addiioal ducaio xpdiur pays off i h log-rm wh i icrass ovrall coomic growh ad ulimaly cosumpio

20 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad Figur 3. Cosumpio pah i wo policy scarios Basic modl wih oly dirc ffc modl 1. Prc chags compard o BaU. 0.50% 0.00% % chag wr BaU -0.50% -1.00% -1.50% -2.00% -2.50% -3.00% clima+ducaio policy clima policy From his xprim of combid policis w ca coclud ha h crowdig-ou ffc ha clima policy ds o hav o ducaio ca b corrcd a modra ad mporary wlfar coss. Tha is addig a policy goal argd a ducaio dos o opardis h achivm of h ohr obciv ha of sabilisig GHG cocraios i h amosphr. 5. Coclusios This papr has xplord h rlaioship bw iovaio huma capial ad clima policy by mas of a Igrad Assssm Modl. This approach is ma o advac h curr saus of clima chag coomics rsarch ad o clarify som of h cocios bw clima chag ad coomic dvlopm. To our kowldg his is a firs of is kid modllig assssm of h irplay bw wo impora drmias of coomic growh iovaio ad huma capial i h cox of clima policy. Firs w proposd a producio srucur wih dogous chical chag suppord by ad calibrad o h mpirical vidc ha pois a a dirc rlaioship bw huma capial ad labour produciviy. Usig his basic srucur w aalysd h idirc ffc of huma capial o chological absorpio ad xplord h rlaioship bw huma capial ad iovaio. Publishd by Brkly Elcroic Prss Srvics

21 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] Usig hs alraiv formulaios w aalys how clima policy affcs iovaio ad h accumulaio of huma capial. suls idica ha clima policy simulas ivsms i rgy wihou rducig hos i gric if hr ar complmariis bw h hs wo forms of ivsms. Alhough gric has a polluio-usig ffc hrough capial produciviy i also has a rgy savig ffc Wh oly h dirc ffc of huma capial is cosidrd advacms i labour produciviy hav a gaiv impac o h virom bcaus labour ad rgy ar gross complms. Thrfor clima policy dcrass ducaio ivsms by a mos 10%. This is du o h capial-skill complmariy assumpio mbddd i our producio srucur. Modllig h idirc ffc of huma capial o absorpiv capaciy miigas h crowdig-ou ffc of clima policy oly slighly. I his cas huma capial augms h abiliy o absorb forig kowldg ha ca b applid o improv rgy fficicy or o rduc h pric of advacd zro-carbo chologis. Howvr h idirc ffc is o abl o courbalac h dirc impac o labour produciviy. All i all h rgy-usig dirc ffc of huma capial always prvails ad hrfor h crowdig-ou iducd by clima policy ds o b addrssd by a spcific policy. Ispcio of a policy mix ha combis clima ad ducaio args shows ha h crowdig-ou o ducaio ca b limiad by icurrig i small addiioal coomic palis ad oly i h shor-ru. Icrasd huma capial simulas log-ru coomic growh which ulimaly rducs clima chag policy coss. This rsul has impora policy implicaios cosidrig h growig cocr ha ffciv clima policy is codiioal o solid coomic dvlopm ad hrfor i ds o b supplmd by ohr policy args. A xploraory ivsigaio of h irdpdc bw ad huma capial shows ha h crowdig-ou ffc iducd by h clima policy is lssd by a largr x wh ducaio coribus o kowldg producio. This xrcis is a prlimiary aalysis ma o suggs h imporac of addiioal mpirical work i his ara

22 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad frcs Aghio P. Howi P A modl of growh hrough craiv dsrucio. Ecoomrica Acmoglu ircd Tchical Chag. v. Eco. Sud Acmoglu. Aghio P. Burszy L. Hmous Th Evirom ad ircd Tchical Chag. NBE Workig Paprs No Barro.J. L W A w daa s of ducaioal aaim i h world NBE Workig Papr No Bhabib J. Spigl M Th rol of huma capial i coomic dvlopm: vidc from aggrga cross-coury daa. J. Moary Eco. 34: Blakau W. Simpso N Public ducaio xpdiur ad growh. J. v. Eco Bosi V. Carraro C. Galoi M. Massi E. Tavoi M WITCH: A World Iducd Tchical Chag Hybrid Modl. Th Ergy J. Spcial Issu Hybrid Modllig of Ergy Evirom Policis: cocilig Boom-up ad Top-dow Bosi V. Massi E. Tavoi M Th WITCH Modl. Srucur Basli Soluios. Fodazio ENI Erico Mai Noa di Lavoro Mila. Bosi V. Cia E. Sgobbi A. Tavoi M Th 2008 WITCH Modl: Nw Modl Faurs ad Basli. Fodazio ENI Erico Mai Noa di Lavoro Mila. Bosi V. Carraro C. Massi E. Tavoi M Iraioal Ergy Spillovrs Ad Th Ecoomics Of Grhous Gas Amosphric Sabilizaio. Ergy Eco Bovbrg A.L. Smuldrs S Eviromal qualiy ad polluio augmaio chological chag i a wo scor dogous growh modl. J. of Public Eco Camro G. J. Proudma ad S. ddig Tchological covrgc rad ad produciviy growh Europa Ecoomic viw Carraro C. Cia E Facor-augmig chical chag: a mpirical assssm. " Workig Paprs 2009_29 parm of Ecoomics Uivrsiy of Vic "Ca' Foscari". Carraro C. Massi E. Nicia L How os Clima Policy Affc Tchical Chag? A Aalysis of h ircio ad Pac of Tchical Progrss i a Clima-Ecoomy Modl. Th Ergy J Coh. Soo M Growh ad huma capial: good daa good rsuls. J. of Eco. Growh Coh W. Lvihal Absorpiv capaciy: A w prspciv o larig ad iovaio. Admiisraiv Sci. Quar Grlagh A clima-chag policy iducd shif from iovaios i carbo-rgy producio o carbo-rgy savig. Ergy Eco Publishd by Brkly Elcroic Prss Srvics

23 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] Glomm G. avikumar B Public vrsus priva ivsm i huma capial: dogous growh ad icom iqualiy. J. Pol. Ecoomy Gouldr L.H. Schidr S Iducd Tchological Chag ad h Aracivss of CO2 Abam Policis. sour. ad Ergy Eco Gradus. Smuldrs S Th rad-off bw viromal car ad log-rm growhpolluio i hr prooyp growh modls. J. Eco Griffih. ddig S. va J Mappig h wo facs of : Produciviy growh i a pal of OEC idusris. v. Eco. Sa Grimaud A. Tourmai F Why ca viromal policy ax promo growh hrough h chal of ducaio? Ecol. Eco Grossma G.M. Hlpma E Trad kowldg spillovrs ad growh. Europa Eco. v Hich F Growh ffcs of a rvu-ural viromal ax rform. J. Eco Hourcad J.C. Ghrsi F Irprig viromal policy cos masurs i: Bosi V. Grlagh. Schlichr S. Eds Modlig Trasiios o Susaiabl vlopm. Edwar Elgar Publishig Lodo. IPCC Clima Chag 2007: Miigaio. Coribuio of Workig Group III o h Fourh Assssm por of h Irgovrmal Pal o Clima Chag [B. Mz O.. avidso P.. Bosch. av L.A. Myr ds] Cambridg Uivrsiy Prss Cambridg Uid Kigdom ad Nw York NY USA. XXX pp. Jaff A.B. Palmr K Eviromal rgulaio ad iovaio: a pal daa sudy. v. Eco. ad Sa Jos C.I Basd Modls of Ecoomic Growh. J. of Poliical Ecoomy Jorgso. Fraumi B Ivsm i ducaio ad U.S. coomic growh. Scad. J. Eco. 94 S51-S70. Laouw J.O. Mody A Iovaio ad h Iraioal iffusio of Eviromally sposiv Tchology. s. Policy Lucas.E O h mchaics of coomic dvlopm. J. Moary Eco Lopz Th virom as a facor of producio: h ffcs of coomic growh ad rad libralizaio. J. Eviro. Eco. Maag Luz W. Cuarsma J.C. Sadrso W Th mography of Educaioal Aaim ad Ecoomic Growh. Scic Makiw N.G. omr. Wil.N A Coribuio o h Empirics of Ecoomic Growh. Quar. J. Eco Massi E. Nicia L Opimal Ivsms ad h Cos of GHG Sabilizaio wh Kowldg Spills across Scors. CESifo Workig Paprs No Nlso. Phlps E Ivsm i humas chological diffusio ad coomic growh. Amr. Eco. v

24 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad Nwll.G. Jaff A.B. Savis.N Th Iducd Iovaio Hypohsis ad Ergy- Savig Tchological Chag. Quar. J. Eco Nordhaus William Modlig Iducd Iovaio i Clima Chag Policy I A. Grublr N. Nakicovic ad W.. Nordhaus ds Modlig Iducd Iovaio i Clima Chag Policy sourcs for h Fuur Prss Washigo Oo V.M. Löschl A. llik Ergy biasd chical chag: A CGE aalysis. sour. Ergy Eco Paurl X Eviromal policy ducaio ad growh: A rappraisal wh lifim is fii. Fodazio ENI Erico Mai Noa di Lavoro Mila. Pssoa S. d Abru S. Pssoa M. ob Elasiciy of Subsiuio Bw Capial ad labour ad is Applicaios o growh ad vlopm. PIE Workig Papr Uivrsiy of Psylvaia. Popp Iducd iovaio ad rgy prics. Amr. Eco. v omr P. M Edogous chological chag. J. Poliical Ecoomy Popp. Nwll.G Whr dos rgy com from? Examiig Crowdig Ou from Eviromally-Fridly. NBE Workig Papr icci F Chals of rasmissio of viromal policy o coomic growh: A survy of h hory. Ecol. Eco Siasi B. va J Th rurs o ducaio: macrocoomics. J. Eco. Survys Smuldrs S. d Nooi M Th impac of rgy cosrvaio o chology ad coomic growh. sour. Ergy Eco Tixira A.A.C. Forua N Huma capial iovaio capabiliy ad coomic growh i Porugal Porugus Eco. J Yoh G Miigaiv capaciy: h mirror imag of adapiv capaciy o h missios sid. Climaic Chag Publishd by Brkly Elcroic Prss Srvics

25 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] Appdix: quaios ad variabls WITCH is a dyamic opimal growh modl op-dow wih a boom-up rprsaio of h rgy scor. I ca b classifid as a hybrid modl. Th gographical covrag is global ad world rgios ar groupd io wlv macro-rgios sharig coomic gographic ad rgy similariis. Ths rgios ar USA Uid Sas WEUO Wsr Europ EEUO Easr Europ KOSAU Kora Souh Africa Ausralia CAJANZ Caada Japa Nw Zalad TE Trasiio Ecoomis MENA Middl Eas ad Norh Africa SSA Sub-Sahara Africa SASIA Souh Asia CHINA Chia ad Taiwa EASIA Souh Eas Asia LACA Lai Amrica Mxico ad Caribba. Th WITCH modl icluds a rag of chology opios ha dscrib h us of rgy ad powr graio. iffr fuls ca b usd for lcriciy graio ad fial cosumpio: coal oil gas uraium ad biofuls. Elcriciy ca b grad usig ihr radiioal fossil-fulbasd chologis or carbo-fr opios. Fossil-ful-basd chologis iclud aural gas combid cycl NGCC oil ad pulvrisd coal PC powr plas. Coal-basd lcriciy ca also b grad usig igrad gasificaio combid cycl producio wih carbo capur ad squsraio IGCC+CCS. Carbo fr chologis iclud hydrolcric ad uclar powr wid urbis ad phoovolaic pals WidSolar ad a backsop chology. A scod backsop opio rprss a alraiv o oil i rasporaio such as hydrog or scod graio biofuls. Th modl faurs dogous chical chag i h rgy scor i h form of boh Larig-By-sarchig ad Larig-By-oig Th modl faurs a gam-horic s-up ha maks i possibl o capur h ocoopraiv aur of iraioal rlaioships. Clima chag is h maor global xraliy bu ohr coomic xraliis iduc fr-ridig bhaviours ad sragic iracios. Th modl ca produc wo diffr soluios. Th coopraiv soluio is globally opimal bcaus i maximiss global social wlfar ad i iraliss viromal ad coomic xraliis. I rprss a firs-bs opimum. Th dcralisd or o-coopraiv soluio is sragically opimal for ach giv rgio Nash quilibrium bu i dos o iralis xraliis. I rprss a scod-bs opimum. A irmdia soluio ha iraliss oly h viromal xraliy ca also b compud. Th Nash quilibrium is compud as a op-loop Nash quilibrium. I is h oucom of a o-coopraiv simulaous op mmbrship gam wih full iformaio. This rmaiig of h Appdix dscribs h mai quaios of h coomic modul of h modl. Th compl dscripio of all modl quaios ca b foud i Bosi al ad Bosi al I ach rgio idxd by a social plar maximiss h followig wlfar fucio: 24 24

26 25 [ ] { } = c L W log A1 whr ar 5-yar im sps ad h discou facor is giv by: [ ] = + = v v ρ A2 whr ν ρ is h pur ra of im prfrc ad L C c = is pr capia cosumpio. Th budg cosrai dfis cosumpio as oupu lss ivsms ad opraio ad maiac coss i diffr rgy chologis I ad OM ivsms i fial good I c ducaio xpdiur I EU ad ivsms i gric ad rgy I I E : I I I I I M O I Y C B E EU C i i = A3 Oupu is producd via a sd CES fucio ha combis capial labour ad rgy srvics: Y Y EN Y L Y K EN A L A K A H Y ρ ρ ρ ρ Ω = A4 Nural chical chag H volvs xogously wih im. Facor produciviy is dogous ad dpds o h sock of gric kowldg or huma capial HK. Ergy produciviy is also affcd by a ddicad sock of rgy kowldg E : L E K HK HK AL AL AE AE AK AK E E χ χ χ = + + = = A5 25 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad Publishd by Brkly Elcroic Prss Srvics 2012

27 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012] Th producio of boh huma capial ad kowldg is characrisd by irmporal spillovrs as h sock availabl i h coomy a ach poi i im coribus o h craio of h fuur sock. Th w addiio o huma capial Z EU is producd usig a Cobb-ouglas combiaio of h xisig sock of huma capial HK ad h curr xpdiur i ducaio I EU. I a similar way h availabl kowldg sock ad curr ivsms I ar combid o produc h w kowldg capial Z. Th sum of h xpos is lss ha o o accou for dimiishig rurs o ducaio ad : Z Z E U whr β β EU = α = α + ϕ + ϕ EU EU < 1 < 1 I I β EU β EU HK ϕ EU ϕ A6 Th sock of boh kowldg ad huma capial dprcia ovr im. Followig Jorgso ad Fraumi 1992 h dprciaio ra of huma capial δ EU is lowr ha h dprciaio ra of kowldg δ 2% ad 5% pr yar rspcivly. Th fial laws of accumulaio rad as follows: HK + 1 = HK 1 δ EU + Z EU + 1 = 1 δ + Z A7 Ivsms i ha build up h sock i quaio A6 rprs h oal iovaiv aciviy of h coomy. Thrfor w also rfr o i as gric iovaio. Ivsms i rgy I ar combid wih h xisig sock of kowldg ad h kowldg of ohr couris SPILL o produc w ddicad rgy kowldg Z. Th modl spcifis hr diffr rgy kowldg socks rgy fficicy ad wo socks of brakhrough kowldg which ar dod wih h idx = ff brakhrough

28 27 1 whr < + + = d SPILL I Z d E ϕ β α ϕ β A8 wih h sadard accumulaio quaio: 1 1 Z + = + δ A9 Th coribuio of forig kowldg SPILL is o immdia bu dpds o h iracio bw wo rms Bosi. al 2008: h firs dscribs h absorpiv capaciy whras h scod capurs h disac from h chology froir which is rprsd by h sock of kowldg i rich couris USA WEUO EEUO CAJANZ ad KOSAU. omsic ivsms ar rquird i ordr o bfi from h iraioal pool of kowldg SPILL HI HI = A10 Th WITCH modl icluds wo backsop chologis c. Ths ar iovaiv zro carbo chologis currly o commrcialisd bcaus vry xpsiv. Thy cssia ddicad ivsms o bcom coomically compiiv ad dploym o bcom availabl o larg scal. Th coss of hs chologis ar modlld wih a wo-facor larig curv. Th ui cos of ach backsop chology c P volvs ovr im wih chology dploym c CC ad h accumulaio of a ddicad kowldg sock c : b c CC CC P P = 0 * A11 whr =brakhrough. sock accumulas wih h prpual rul ad wih h coribuio of iraioal kowldg spillovrs as i q. A8-A9 Equaios A1-A11 dscrib h basic formulaio of h modl. Sarig from his vrsio w cosidrd wo possibl variaios. Firs scio 3.2 huma capial has a idirc ffc o 27 Carraro al.: Huma Capial Iovaio ad Clima Policy: A Igrad Publishd by Brkly Elcroic Prss Srvics 2012

29 28 chological absorpio ad i coribus o icrasig h absorpiv capaciy i h rgy scor: HK SPILL HI HI + = A13 Scod scio 3.3 huma capial is a ipu i h craio of boh socks of gric ad rgy kowldg. Thrfor quaios A6 A8 ad A12 ar modifid as follows EU EU HK SPILL I Z HK I Z d γ ϕ β γ ϕ β α α = = A14 Wh huma capial is iroducd i h producio fucio of w idas h paramrs α ad ϕ ar rcalibrad so ha h dyamics of kowldg ad ducaio ivsms rplica hos i h modl vrsio 1 α α < ad ϕ ϕ <. 28 Fodazio Ei Erico Mai Workig Paprs Ar. 669 [2012]