An integrated assessment model with endogenous technology is described. Optimal policy involves a clean transition using both carbon tax and clean research subsidy instruments. The paper explores each instrument’s relative performance when acting alone, helping to explain different outcomes in...

The optimal transition to a low-carbon economy must account for adjustment costs in switching from dirty to clean capital, technological progress, and economic and climatic shocks. We study the low-carbon transition using a dynamic stochastic general equilibrium model with emissions abatement...