Renewable Technology Adoption Costs and Economic Growth

We develop a dynamic general equilibrium integrated assessment model thatincorporates costs due to new technology adoption in renewable energy as wellas externalities associated with carbon emissions and renewable technologyspillovers. We use world economy data to calibrate our model and investigatethe effects of the technology adoption channel on renewable energy adoptionand on the optimal energy transition. The calibrated model implies several interestingconnections between technology adoption costs, the two externalities,and welfare. We investigate the relative effectiveness of two policy instruments-Pigouvian carbon taxes and policies that internalize spillover effects-in isolationas well as in tandem. Our findings suggest that renewable technology adoptioncosts are of quantitative importance for the energy transition. We find thatthe two policy instruments are better thought of as complements rather thansubstitutes