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Gauthier VERMANDEL (Dauphine & X ) “Environmental Subsidies to mitigate Transition Risk”. “

September 26, 2022 @ 12:15 pm - 1:30 pm

The Macroeconomics Seminar:
Time: 12:15 pm – 13:30 pm
Date: 26th of September 2022

Room 3001

Gauthier VERMANDEL (Dauphine & X ) “Environmental Subsidies to mitigate Transition Risk”.

Abstract : We explore the role of public subsidies in mitigating the transition risk associated with a climate-neutral objective by 2060. We develop and estimate an environmental dynamic stochastic generalequilibrium model for the world economy featuring an endogen ous market structure for green products. We show that public subsidies, financed by a carbon tax, are an efficient instrument to promote firm entry into the abatement goods sector by fostering competition and lowering the selling price of such products. We estimate that the subsidy, optimally distributed between startups at 60% and existing companies at 40%, will save nearly $2.9 trillion in GDP each year by 2060.

Joint work : Eric Jondeau (Univ of Lausanne), Grégory Levieuge (Banque de France), Jean-Guillaume Sahuc (Banque de France)

Gregory CORCOS (Ecole Polytechnique et CREST)