Green Technology Adoption and the Business Cycle

Abstract

We analyze the adoption of green technology in a dynamic economy affected by random shocks where demand spillovers are the main driver of technological improvements. Firms' beliefs about the best technology and consumers' anticipation drive the path of the economy. We derive the optimal policy of investment subsidy and the expected time and likelihood of reaching a targeted level of environmental quality under economic uncertainty. This allows us to estimate the value as a function of the strength of spillover effects that should be given to the environment in order to avoid an environmental catastrophe.

The social cost of carbon driven by green behaviors

“…Cai Y. et al [20] established a nine-dimensional dynamic optimization question which was presented by Bellman equation to discuss SCC under a variety of abrupt climate change scenarios, concluding that SCC would fluctuate greatly due to economic or climate risks. Bourgeon J M. and Hovsepian [21] analyzed the use of green technology in a dynamic economy affected by stochastic impact. Gerlagh R., Liski M. [22] studied the optimal future pricing of SCC when the effects of climate change are uncertain, and a quantitative assessment suggests that the price of carbon will grow roughly at the economic growth rate over the next 100 years.…”